Cell division in Gram-negative organisms requires coordinated invagination of the multilayered cell envelope such that each daughter receives an intact inner membrane, peptidoglycan (PG) layer and outer membrane (OM). Here, we identify DipM, a putative LytM endopeptidase in Caulobacter crescentus, and show that it plays a critical role in maintaining cell envelope architecture during growth and division. DipM localized to the division site in an FtsZ-dependent manner via its PG-binding LysM domains. Although not essential for viability, ΔdipM cells exhibited gross morphological defects, including cell widening and filamentation, indicating a role in cell shape maintenance and division that we show requires its LytM domain. Strikingly, cells lacking DipM also showed OM blebbing at the division site, at cell poles and along the cell body. Cryo electron tomography of sacculi isolated from cells depleted of DipM revealed marked thickening of the PG as compared to wild type, which we hypothesize leads to loss of trans-envelope contacts between components of the Tol–Pal complex. We conclude that DipM is required for normal envelope invagination during division and to maintain a sacculus of constant thickness that allows for maintenance of OM connections throughout the cell envelope.