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 (By similarity). Found in most tissues during development. Strikingly high levels are found in lymphoid organs, including the thymus, spleen, and gut-associated lymphoid tissue. Constitutively expressed in immature and mature thymocyte subpopulations as well as in resting peripheral T-cells; activation of these leads to down-regulation. By cytokines. TNF-alpha may regulate expression in the thymus. Up-regulated in presence of reactive oxygen species (ROS), like H(2)O(2), in LPS-tolerized macrophages. 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 (By similarity). The OTU domain mediates the deubiquitinase activity. Belongs to the peptidase C64 family.