Sugars are important nutrients for many animals, but are also proposed to contribute to overnutrition-derived metabolic diseases in humans. Understanding the genetic factors governing dietary sugar tolerance therefore has profound biological and medical significance. Paralogous Mondo transcription factors ChREBP and MondoA, with their common binding partner Mlx, are key sensors of intracellular glucose flux in mammals. Here we report analysis of the in vivo function of Drosophila melanogaster Mlx and its binding partner Mondo (ChREBP) in respect to tolerance to dietary sugars. Larvae lacking mlx or having reduced mondo expression show strikingly reduced survival on a diet with moderate or high levels of sucrose, glucose, and fructose. mlx null mutants display widespread changes in lipid and phospholipid profiles, signs of amino acid catabolism, as well as strongly elevated circulating glucose levels. Systematic loss-of-function analysis of Mlx target genes reveals that circulating glucose levels and dietary sugar tolerance can be genetically uncoupled: Krüppel-like transcription factor Cabut and carbonyl detoxifying enzyme Aldehyde dehydrogenase type III are essential for dietary sugar tolerance, but display no influence on circulating glucose levels. On the other hand, Phosphofructokinase 2, a regulator of the glycolysis pathway, is needed for both dietary sugar tolerance and maintenance of circulating glucose homeostasis. Furthermore, we show evidence that fatty acid synthesis, which is a highly conserved Mondo-Mlx-regulated process, does not promote dietary sugar tolerance. In contrast, survival of larvae with reduced fatty acid synthase expression is sugar-dependent. Our data demonstrate that the transcriptional network regulated by Mondo-Mlx is a critical determinant of the healthful dietary spectrum allowing Drosophila to exploit sugar-rich nutrient sources.