Elucidating signal transduction mechanisms of innate immune pathways is essential to defining how they elicit distinct cellular responses. Toll-like receptors (TLR) signal through their cytoplasmic TIR domains which bind other TIR domain-containing adaptors. dSARM/SARM1 is one such TIR domain adaptor best known for its role as the central axon degeneration trigger after injury. In degeneration, SARM1's domains have been assigned unique functions: the ARM domain is auto-inhibitory, SAM-SAM domain interactions mediate multimerization, and the TIR domain has intrinsic NAD+ hydrolase activity that precipitates axonal demise. Whether and how these distinct functions contribute to TLR signaling is unknown. Here we show divergent signaling requirements for dSARM in injury-induced axon degeneration and TLR-mediated developmental glial phagocytosis through analysis of new knock-in domain and point mutations. We demonstrate intragenic complementation between reciprocal pairs of domain mutants during development, providing evidence for separability of dSARM functional domains in TLR signaling. Surprisingly, dSARM's NAD+ hydrolase activity is strictly required for both degenerative and developmental signaling, demonstrating that TLR signal transduction requires dSARM's enzymatic activity. In contrast, while SAM domain-mediated dSARM multimerization is important for axon degeneration, it is dispensable for TLR signaling. Finally, dSARM functions in a linear genetic pathway with the MAP3K Ask1 during development but not in degenerating axons. Thus, we propose that dSARM exists in distinct signaling states in developmental and pathological contexts.