Perturbations to animal-associated microbial communities (the microbiota) have deleterious effects on various aspects of host fitness, including dysregulated energy metabolism. However, the molecular processes underlying these microbial impacts on the host are poorly understood. In this study, we identify a novel connection between the microbiota and the neuronal factor Arc1 that affects metabolism and development in Drosophila. We find that Arc1 exhibits tissue-specific microbiota-dependent expression changes, and that flies bearing a null mutation of Arc1 complete larval development at a dramatically slowed rate compared to wild-type animals. In contrast, monoassociation with a single Acetobacter sp. isolate was sufficient to enable Arc1 mutants to develop at a wild-type rate. These developmental phenotypes are highly sensitive to composition of the larval diet, suggesting the growth rate defects of GF flies lacking Arc1 reflect metabolic dysregulation. Additionally, we show that pre-conditioning the larval diet with Acetobacter sp. partially accelerates Arc1 mutant development, but live bacteria are required for the full growth rate promoting effect. Finally, GF Arc1 mutants display multiple traits consistent with reduced insulin signaling activity that are reverted by association with Acetobacter sp., suggesting a potential mechanism underlying the microbe-dependent developmental phenotypes. Our results reveal a novel role for Arc1 in modulating insulin signaling, metabolic homeostasis, and growth rate that is specific to the host’s microbial and nutritional environment.SUMMARYDrosophila Arc1 exhibits microbiota-dependent, tissue-specific differential expression, mitigates the impacts of germ-free rearing on insulin signaling and growth rate, but is dispensable for metabolic homeostasis in Acetobacter-colonized flies.