Nucleotide-binding oligomerization domain 2 (NOD2) primarily acts as a cytoplasmic pattern recognition receptor (PRR) recognizing muramyl dipeptide (MDP), the basic unit of bacterial cell wall, playing a key role in the sensing of pathogens. However, accumulating investigations indicate that, in addition to being a PRR, NOD2 also has a wide range of immunomodulatory effects and is involved in the pathogenesis of several inflammatory and infectious diseases, with Crohn’s disease (CD) and leprosy being typical examples. Here, we summarize the MDP dependent and independent activation of NOD2 and the corresponding downstream signaling pathways. In addition to the classic immune response triggered by NOD2, we also review the latest findings of NOD2 regulating immune homeostasis through trained immunity and immune tolerance. Finally, we focus on the diverse roles of NOD2 in defending against mycobacterial infections. A further comprehensive understanding of NOD2 will provide new insights into the treatment of infectious and inflammatory diseases.