The human gut must regulate its immune response to resident and pathogenic bacteria, numbering in the trillions. The peptidoglycan component of the bacterial cell wall is a dense and rigid structure that consists of polymeric carbohydrates and highly cross-linked peptides which offers protection from the host and surrounding environment. Nucleotide-binding oligomerization domain-containing protein 2 (NOD2), a human membrane-associated innate immune receptor found in the gut epithelium and mutated in an estimated 30% of Crohn's disease patients, binds to peptidoglycan fragments and initiates an immune response. Using a combination of chemical synthesis, advanced analytical assays, and protein biochemistry, we tested the binding of a variety of synthetic peptidoglycan fragments to wild-type (WT)-NOD2. Only when the protein was presented in the native membrane did binding measurements correlate with a NOD2-dependent nuclear factor kappa-light-chain-enhancer of activated B cells (NF-κB) response, supporting the hypothesis that the native-membrane environment confers ligand specificity to the NOD2 receptor for NF-κB signaling. While N-acetyl-muramyl dipeptide (MDP) has been thought to be the minimal peptidoglycan fragment necessary to activate a NOD2-dependent immune response, we found that fragments with and without the dipeptide moiety are capable of binding and activating a NOD2-dependent NF-κB response, suggesting that the carbohydrate moiety of the peptidoglycan fragments is the minimal functional epitope. This work highlights the necessity of studying NOD2-ligand binding in systems that resemble the receptor's natural environment, as the cellular membrane and/or NOD2 interacting partners appear to play a crucial role in ligand binding and in triggering an innate immune response.