Familial cylindromatosis is an autosomal dominant predisposition to tumours of 
skin appendages called cylindromas. Familial cylindromatosis is caused by 
mutations in a gene encoding the CYLD protein of previously unknown function. 
Here we show that CYLD is a deubiquitinating enzyme that negatively regulates 
activation of the transcription factor NF-kappaB by specific tumour-necrosis 
factor receptors (TNFRs). Loss of the deubiquitinating activity of CYLD 
correlates with tumorigenesis. CYLD inhibits activation of NF-kappaB by the TNFR 
family members CD40, XEDAR and EDAR in a manner that depends on the 
deubiquitinating activity of CYLD. Downregulation of CYLD by RNA-mediated 
interference augments both basal and CD40-mediated activation of NF-kappaB. The 
inhibition of NF-kappaB activation by CYLD is mediated, at least in part, by the 
deubiquitination and inactivation of TNFR-associated factor 2 (TRAF2) and, to a 
lesser extent, TRAF6. These results indicate that CYLD is a negative regulator 
of the cytokine-mediated activation of NF-kappaB that is required for 
appropriate cellular homeostasis of skin appendages.