CYLD is a lysine 63-deubiquitinating enzyme that inhibits NF-κB and JNK 
signaling. Here, we show that CYLD knock-out mice have markedly increased 
numbers of regulatory T cells (Tregs) in peripheral lymphoid organs but not in 
the thymus. In vitro stimulation of CYLD-deficient naive T cells with 
anti-CD3/28 in the presence of TGF-β led to a marked increase in the number of 
Foxp3-expressing T cells when compared with stimulated naive control CD4(+) 
cells. Under endogenous conditions, CYLD formed a complex with Smad7 that 
facilitated CYLD deubiquitination of Smad7 at lysine 360 and 374 residues. 
Moreover, this site-specific ubiquitination of Smad7 was required for activation 
of TAK1 and p38 kinases. Finally, knockdown of Smad7 or inhibition of p38 
activity in primary T cells impaired Treg differentiation. Together, our results 
show that CYLD regulates TGF-β signaling function in T cells and the development 
of Tregs through deubiquitination of Smad7.