TRAF1 is a signaling adaptor known for its role in tumor necrosis factor receptor-induced cell survival. Here we show that monocytes from healthy human subjects with a rheumatoid arthritis–associated single-nucleotide polymorphism (SNP) in the TRAF1 gene express less TRAF1 protein but greater amounts of inflammatory cytokines in response to lipopolysaccharide (LPS). The TRAF1 MATH domain binds directly to three components of the linear ubiquitination (LUBAC) complex, SHARPIN, HOIP and HOIL-1, to interfere with the recruitment and linear ubiquitination of NEMO. This results in decreased NF-κB activation and cytokine production, independently of tumor necrosis factor. Consistent with this, Traf1−/− mice show increased susceptibility to LPS-induced septic shock. These findings reveal an unexpected role for TRAF1 in negatively regulating Toll-like receptor signaling, providing a mechanistic explanation for the increased inflammation seen with a disease-associated TRAF1 SNP.