Ubiquitin-editing enzyme that contains both ubiquitin ligase and deubiquitinase activities. Involved in immune and inflammatory responses signaled by cytokines, such as TNF-alpha and IL-1 beta, or pathogens via Toll-like receptors (TLRs) through terminating NF-kappa-B activity. Essential component of a ubiquitin-editing protein complex, comprising also RNF11, ITCH and TAX1BP1, that ensures the transient nature of inflammatory signaling pathways. In cooperation with TAX1BP1 promotes disassembly of E2-E3 ubiquitin protein ligase complexes in IL-1R and TNFR-1 pathways; affected are at least E3 ligases TRAF6, TRAF2 and BIRC2, and E2 ubiquitin-conjugating enzymes UBE2N and UBE2D3. In cooperation with TAX1BP1 promotes ubiquitination of UBE2N and proteasomal degradation of UBE2N and UBE2D3. Upon TNF stimulation, deubiquitinates 'Lys-63'-polyubiquitin chains on RIPK1 and catalyzes the formation of 'Lys-48'-polyubiquitin chains. This leads to RIPK1 proteasomal degradation and consequently termination of the TNF- or LPS-mediated activation of NF-kappa-B. Deubiquitinates TRAF6 probably acting on 'Lys-63'-linked polyubiquitin. Upon T-cell receptor (TCR)-mediated T-cell activation, deubiquitinates 'Lys-63'-polyubiquitin chains on MALT1 thereby mediating disassociation of the CBM (CARD11:BCL10:MALT1) and IKK complexes and preventing sustained IKK activation. Deubiquitinates NEMO/IKBKG; the function is facilitated by TNIP1 and leads to inhibition of NF-kappa-B activation. Upon stimulation by bacterial peptidoglycans, probably deubiquitinates RIPK2. Can also inhibit I-kappa-B-kinase (IKK) through a non-catalytic mechanism which involves polyubiquitin; polyubiquitin promotes association with IKBKG and prevents IKK MAP3K7-mediated phosphorylation. Targets TRAF2 for lysosomal degradation. In vitro able to deubiquitinate 'Lys-11'-, 'Lys-48'- and 'Lys-63' polyubiquitin chains. Inhibitor of programmed cell death. Has a role in the function of the lymphoid system. Required for LPS-induced production of pro-inflammatory cytokines and IFN beta in LPS-tolerized macrophages. Thiol-dependent hydrolysis of ester, thioester, amide, peptide and isopeptide bonds formed by the C-terminal Gly of ubiquitin (a 76-residue protein attached to proteins as an intracellular targeting signal). Homodimer. Interacts with TNIP1, TAX1BP1 and TRAF2. Interacts with RNF11, ITCH and TAX1BP1 only after TNF stimulation; these interaction are transient and they are lost after 1 hour of stimulation with TNF (By similarity). Interacts with YWHAZ and YWHAH. Interacts with IKBKG; the interaction is induced by TNF stimulation and by polyubiquitin. Interacts with RIPK1. Interacts with UBE2N; the interaction requires TAX1BP1. Interacts with TRAF6; the interaction is inhibited by HTLV-1 protein Tax. By TNF. The A20-type zinc fingers mediate the ubiquitin ligase activity. The A20-type zinc finger 4 selectively recognizes 'Lys-63'-linked polyubiquitin. The A20-type zinc finger 4-7 are sufficient to bind polyubiquitin. The OTU domain mediates the deubiquitinase activity. Proteolytically cleaved by MALT1 upon TCR stimulation; disrupts NF-kappa-B inhibitory function and results in increased IL-2 production. It is proposed that only a fraction of TNFAIP3 colocalized with TCR and CBM complex is cleaved, leaving the main TNFAIP3 pool intact. The disease is caused by variants affecting the gene represented in this entry. Belongs to the peptidase C64 family.