Innate immunity mediated by Toll signalling has been extensively studied, but how Toll signalling is precisely controlled in balancing innate immune responses remains poorly understood. It was reported that the plasma membrane localization of Drosophila MyD88 is necessary for the recruitment of cytosolic adaptor Tube to the cell surface, thus contributing to Toll signalling transduction. Here we demonstrate that Drosophila Pellino functions as a negative regulator in Toll-mediated signalling. We show that Pellino accumulates at the plasma membrane upon the activation of Toll signalling in a MyD88-dependent manner. Moreover, we find that Pellino is associated with MyD88 via its CTE domain, which is necessary and sufficient to promote Pellino accumulation at the plasma membrane where it targets MyD88 for ubiquitination and degradation. Collectively, our study uncovers a mechanism by which a feedback regulatory loop involving MyD88 and Pellino controls Toll-mediated signalling, thereby maintaining homeostasis of host innate immunity.