Klebsiella pneumoniae is an important cause of multidrug-resistant infections throughout the world. Recent studies highlight the emergence of multidrug-resistant K. pneumoniae strains that also show resistance to colistin, a last line antibiotic which is currently used to treat life threatening infections. Colistin resistance in the majority of K. pneumoniae strains arises from mutational inactivation of the mgrB gene, a negative PhoPQ two-component signalling system regulator. However, the precise molecular resistance mechanisms of mgrB-associated colistin resistance and its impact on virulence remain unclear. Here, we constructed an mgrB gene K. pneumoniae mutant and performed characterisation of its lipid A structure, polymyxin and antimicrobial peptide resistance, virulence and inflammatory responses upon infection. Our analyses revealed that inactivation of the mgrB gene triggers extensive PhoPQ-dependent remodelling of the lipopolysaccharide lipid A section. mgrB-induced lipid A remodelling mediates not only high level resistance to polymyxin antibiotics, but also enhances K. pneumoniae virulence by decreasing its susceptibility to antimicrobial peptides and attenuating activation of host inflammatory responses which are crucial for clearing infection. Overall, our findings have important implications for patient management and antimicrobial stewardship, while also stressing that the development of antibiotic resistance is not always linked with subdued bacterial fitness and virulence.