Paneth cells (PCs), a specialized secretory cell type in the small intestine, are increasingly recognized as having an essential role in host responses to microbiome and environmental stresses. Whether and how commensal and pathogenic microbes modify PC composition to modulate inflammation remain unclear. Using newly developed PC-reporter mice under conventional and gnotobiotic conditions, we determined PC transcriptomic heterogeneity in response to commensal and invasive microbes at single cell level. Infection expands the pool of CD74+ PCs, whose number correlates with auto or allogeneic inflammatory disease progressions in mice. Similar correlation was found in human inflammatory disease tissues. Infection-stimulated cytokines increase production of reactive oxygen species (ROS) and expression of a PC-specific mucosal pentraxin (Mptx2) in activated PCs. A PC-specific ablation of MyD88 reduced CD74+ PC population, thus ameliorating pathogen-induced systemic disease. A similar phenotype was also observed in mice lacking Mptx2. Thus, infection stimulates expansion of a PC subset that influences disease progression.