Methionine-1 (M1)-linked ubiquitin chains regulate the activity of NF-κB, immune homeostasis, and responses to infection. The importance of negative regulators of M1-linked chains in vivo remains poorly understood. Here, we show that the M1-specific deubiquitinase OTULIN is essential for preventing TNF-associated systemic inflammation in humans and mice. A homozygous hypomorphic mutation in human OTULIN causes a potentially fatal autoinflammatory condition termed OTULIN-related autoinflammatory syndrome (ORAS). Four independent OTULIN mouse models reveal that OTULIN deficiency in immune cells results in cell-type-specific effects, ranging from over-production of inflammatory cytokines and autoimmunity due to accumulation of M1-linked polyubiquitin and spontaneous NF-κB activation in myeloid cells to downregulation of M1-polyubiquitin signaling by degradation of LUBAC in B and T cells. Remarkably, treatment with anti-TNF neutralizing antibodies ameliorates inflammation in ORAS patients and rescues mouse phenotypes. Hence, OTULIN is critical for restraining life-threatening spontaneous inflammation and maintaining immune homeostasis.