Frontotemporal dementia (FTD) is the most common form of dementia before 60 years of age. Rare pathogenic mutations in CHMP2B, which encodes a component of the endosomal sorting complex required for transport (ESCRT-III), are associated with FTD linked to chromosome 3 (FTD3). Animal models of FTD3 have not yet been reported, and what signaling pathways are misregulated by mutant CHMP2B in vivo is unknown. Here we report the establishment of a Drosophila model of FTD3 and show the genetic interactions between mutant CHMP2B and other components of ESCRT. Through an unbiased genome-wide screen, we identified 29 modifier loci and found that serpin5 (Spn5), a largely uncharacterized serine protease inhibitor, suppresses the melanization phenotype induced by mutant CHMP2B in the fly eye. We also found that Spn5 is a negative regulator of the Toll pathway and functions extracellularly, likely by blocking the proteolytic activation of Spaetzle, the Toll receptor ligand. Moreover, Spn5 inhibited activation of the Toll pathway by mutant CHMP2B. Our findings identify Spn5 as a regulator of the Toll pathway and CHMP2B toxicity and show that the Toll pathway is a major signaling pathway misregulated by mutant CHMP2B in vivo. This fly model will be useful to further dissect genetic pathways that are potentially relevant to the pathogenesis and treatment of FTD.