Morphogens provide positional information and their concentration is key to the organized development of multicellular organisms. Nitrogen-fixing root nodules are unique organs induced by Nod factor-producing bacteria. Localized production of Nod factors establishes a developmental field within the root where plant cells are reprogrammed to form infection threads and primordia. We found that regulation of Nod factor levels by Lotus japonicus is required for the formation of nitrogen-fixing organs, determining the fate of this induced developmental program. Our analysis of plant and bacterial mutants shows that a host chitinase modulates Nod factor levels possibly in a structure-dependent manner. In Lotus, this is required for maintaining Nod factor signalling in parallel with the elongation of infection threads within the nodule cortex, while root hair infection and primordia formation are not influenced. Our study shows that infected nodules require balanced levels of Nod factors for completing their transition to functional, nitrogen-fixing organs.