The deubiquitinating enzyme CYLD has recently been implicated in the regulation of signal transduction, but its physiological function and mechanism of action are still elusive. In this study, we show that CYLD plays a pivotal role in regulating T cell activation and homeostasis. T cells derived from Cyld knockout mice display a hyperresponsive phenotype and mediate the spontaneous development of intestinal inflammation. Interestingly, CYLD targets a ubiquitin-dependent kinase, transforming growth factor–β-activated kinase 1 (Tak1), and inhibits its ubiquitination and autoactivation. Cyld-deficient T cells exhibit constitutively active Tak1 and its downstream kinases c-Jun N-terminal kinase and IκB kinase β. These results emphasize a critical role for CYLD in preventing spontaneous activation of the Tak1 axis of T cell signaling and, thereby, maintaining normal T cell function.