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The immune system continually battles against pathogen-induced pressures, which often leads to the evolutionary expansion of immune gene families in a species-specific manner. For example, thepalsgene family expanded to 39 members in theCaenorhabditis elegansgenome, in comparison to a single mammalianpalsortholog. Our previous studies have revealed that two members of this family,pals-22andpals-25, act as antagonistic paralogs to control the Intracellular Pathogen Response (IPR). The IPR is a protective transcriptional response, which is activated upon infection by two molecularly distinct natural intracellular pathogens ofC.elegans–the Orsay virus and the fungusNematocida parisiifrom the microsporidia phylum. In this study, we identify a previously uncharacterized member of thepalsfamily,pals-17, as a newly described negative regulator of the IPR.pals-17mutants show constitutive upregulation of IPR gene expression, increased immunity against intracellular pathogens, as well as impaired development and reproduction. We also find that two other previously uncharacterizedpalsgenes,pals-20andpals-16, are positive regulators of the IPR, acting downstream ofpals-17. These positive regulators reverse the effects caused by the loss ofpals-17on IPR gene expression, immunity, and development. We show that the negative IPR regulator protein PALS-17 and the positive IPR regulator protein PALS-20 colocalize inside and at the apical side of intestinal epithelial cells, which are the sites of infection for IPR-inducing pathogens. In summary, our study demonstrates that severalpalsgenes from the expandedpalsgene family act as ON/OFF switch modules to regulate a balance between organismal development and immunity against natural intracellular pathogens inC.elegans.