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It produces an endotoxin which upon ingestion and liberation into the gut of the larvae of insect pest, destructs the gut lining of the insect hence killing it.
Bacillus thuringiensis produces an endotoxin which when ingested and released in the gut of the larvae of insect pest distrupts its gut lining and thus caterpillars are killed. By killing the caterpillars, it helps in pest control.