Paneth cells are the primary source of C-type lysozyme, a β-1,4-N-acetylmuramoylhydrolase that enzymatically processes bacterial cell walls. Paneth cells are normally present in human cecum and ascending colon, but are rarely found in descending colon and rectum; Paneth cell metaplasia in this region and aberrant lysozyme production are hallmarks of inflammatory bowel disease (IBD) pathology. Here, we examined the impact of aberrant lysozyme production in colonic inflammation. Targeted disruption of Paneth cell lysozyme (Lyz1) protected mice from experimental colitis. Lyz1-deficiency diminished intestinal immune responses to bacterial molecular patterns and resulted in the expansion of lysozyme-sensitive mucolytic bacteria, including Ruminococcus gnavus, a Crohn's disease-associated pathobiont. Ectopic lysozyme production in colonic epithelium suppressed lysozyme-sensitive bacteria and exacerbated colitis. Transfer of R. gnavus into Lyz1^−/− hosts elicited a type 2 immune response, causing epithelial reprograming and enhanced anti-colitogenic capacity. In contrast, in lysozyme-intact hosts, processed R. gnavus drove pro-inflammatory responses. Thus, Paneth cell lysozyme balances intestinal anti- and pro-inflammatory responses, with implications for IBD.