Members of the insulin peptide family have conserved roles in the regulation of growth and metabolism in a wide variety of metazoans. Drosophila insulin-like peptides (Dilps) promote tissue growth through the single insulin-like receptor (InR). Despite the important role of Dilps in nutrient-dependent growth control, the molecular mechanism that regulates the activity of circulating Dilps is not well understood. Here, we report the function of a novel secreted decoy of InR (SDR) as a negative regulator of insulin signaling. SDR is predominantly expressed in glia and is secreted into the hemolymph. Larvae lacking SDR grow at a faster rate, thereby increasing adult body size. Conversely, overexpression of SDR reduces body growth non-cell-autonomously. SDR is structurally similar to the extracellular domain of InR and interacts with several Dilps in vitro independent of Imp-L2, the ortholog of the mammalian insulin-like growth factor-binding protein 7 (IGFBP7). We further demonstrate that SDR is constantly secreted into the hemolymph independent of nutritional status and is essential for adjusting insulin signaling under adverse food conditions. We propose that Drosophila uses a secreted decoy to fine-tune systemic growth against fluctuations of circulating insulin levels.