RIPK2 mediates inflammatory signaling by the bacteria-sensing receptors NOD1 and NOD2, and inhibition of RIPK2 by kinase inhibitors is an emerging strategy to ameliorate NOD-mediated pathologies. However, the role for RIPK2’s kinase activity remains unclear. Here, we reveal that RIPK2 kinase activity is dispensable for NOD2 inflammatory signaling and show that RIPK2 inhibitors function instead by antagonizing XIAP-binding and XIAP-mediated ubiquitination of RIPK2. We map the XIAP binding site on RIPK2 to the loop between 2 and 3 of the N-lobe of the kinase, which is in close proximity to the ATP-binding pocket. Through characterization of a new series of ATP-competitive RIPK2 inhibitors, we identify the molecular features that determine their inhibition of both the RIPK2-XIAP interaction, and of cellular and in vivo NOD2 signaling. Our study exemplifies how targeting of the ATP-binding pocket in RIPK2 can be exploited to interfere with the RIPK2-XIAP interaction for modulation of NOD signaling.