Many insects defend themselves against predation by being distasteful or toxic. The chemicals involved may be sequestered from their diet or synthesized de novo in the insects’ body tissues. Parasitoid wasps are a diverse group of insects that play a critical role in regulating their host insect populations such as lepidopteran caterpillars. The successful parasitization of caterpillars by parasitoid wasps is contingent upon their aptitude for locating and selecting suitable hosts, thereby determining their efficacy in parasitism. However, some hosts can be toxic to parasitoid wasps, which can pose challenges to their survival and reproduction. Caterpillars employ a varied array of defensive mechanisms to safeguard themselves against natural predators, particularly parasitoid wasps. These defenses are deployed pre-emptively, concurrently, or subsequently during encounters with such natural enemies. Caterpillars utilize a range of strategies to evade detection or deter and evade attackers. These tactics encompass both measures to prevent being noticed and mechanisms aimed at repelling or eluding potential threats. Post-attack strategies aim to eliminate or incapacitate the eggs or larvae of parasitoids. In this review, we investigate the dietary challenges faced by parasitoid wasps when encountering toxic hosts. We first summarize the known mechanisms through which insect hosts can be toxic to parasitoids and which protect caterpillars from parasitization. We then discuss the dietary adaptations and physiological mechanisms that parasitoid wasps have evolved to overcome these challenges, such as changes in feeding behavior, detoxification enzymes, and immune responses. We present new analyses of all published parasitoid–host records for the Ichneumonoidea that attack Lepidoptera caterpillars and show that classically toxic host groups are indeed hosts to significantly fewer species of parasitoid than most other lepidopteran groups.