The cylindromatosis tumor suppressor gene (Cyld) encodes a deubiquitinating enzyme (CYLD) with immunoregulatory function. In this study, we evaluated the role of Cyld in T cell ontogeny by generating a mouse (Cyld(Delta9)) with a thymocyte-restricted Cyld mutation that causes a C-terminal truncation of the protein and reciprocates catalytically inactive human mutations. Mutant mice had dramatically reduced single positive thymocytes and a substantial loss of peripheral T cells. The analyses of polyclonal and TCR-restricted thymocyte populations possessing the mutation revealed a significant block in positive selection and an increased occurrence of apoptosis at the double-positive stage. Interestingly, in the context of MHC class I and II restricted TCR transgenes, lack of functional CYLD caused massive deletion of thymocytes that would have been positively selected, which is consistent with an impairment of positive selection. Biochemical analysis revealed that Cyld(Delta9) thymocytes exhibit abnormally elevated basal activity of NF-kappaB and JNK. Most importantly, inactivation of NF-kappaB essential modulator fully restored the NF-kappaB activity of Cyld(Delta9) thymocytes to physiologic levels and rescued their developmental and survival defect. This study identifies a fundamental role for functional CYLD in establishing the proper threshold of activation for thymocyte selection by a mechanism dependent on NF-kappaB essential modulator.