Protein ubiquitination regulates protein stability and modulates the composition of signaling complexes. A20 is a negative regulator of inflammatory signaling, but the molecular mechanisms involved are ill understood. Here, we generated Tnfaip3 gene-targeted A20 mutant mice bearing inactivating mutations in the zinc finger 7 (ZnF7) and ZnF4 ubiquitin-binding domains, revealing that binding to polyubiquitin is essential for A20 to suppress inflammatory disease. We demonstrate that a functional ZnF7 domain was required for recruiting A20 to the tumor necrosis factor receptor 1 (TNFR1) signaling complex and to suppress inflammatory signaling and cell death. The combined inactivation of ZnF4 and ZnF7 phenocopied the postnatal lethality and severe multiorgan inflammation of A20-deficient mice. Conditional tissue-specific expression of mutant A20 further revealed the key role of ubiquitin-binding in myeloid and intestinal epithelial cells. Collectively, these results demonstrate that the anti-inflammatory and cytoprotective functions of A20 are largely dependent on its ubiquitin-binding properties.