Tumor necrosis factor-induced protein 3 (TNFAIP3; also known as A20) negatively regulates NF-κB and MAPK signals to control inflammatory responses. TNFAIP3 also protects against TNF-induced cell death. Intestinal epithelial cell (IEC) expression of TNFAIP3 improves barrier function and tight junction integrity and prevents dextran sulfate sodium (DSS)-induced IEC death and colitis. We therefore investigated the effects of TNFAIP3 expression in IEC on immune homeostasis in the intestines of immune-compromised mice. Villin-TNFAIP3 (v-TNFAIP3) transgenic mice were interbred with IL-10−/−mice (v-TNFAIP3 × IL-10−/−) and incidence, onset, and severity of colitis was assessed. v-TNFAIP3 × IL-10−/−mice displayed severe, early onset, and highly penetrant colitis that was not observed in IL-10−/−or v-TNFAIP3 mice. V-TNFAIP3 mice displayed altered expression of mucosal cytokines, increased numbers of mucosal regulatory T cells, and altered expression of mucosal antimicrobial peptides (AMPs). Microbial colonization of the inner mucus layer of v-TNFAIP3 mice was observed, along with alterations in the microbiome, but this was not sufficient to induce colitis in v-TNFAIP3 mice. The relative sterility of the inner mucus layer observed in wild-type and IL-10−/−mice was lost in v-TNFAIP3 × IL-10−/−mice. Thus IEC-derived factors, induced by signals that are inhibited by TNFAIP3, suppress the onset of inflammatory bowel disease in IL-10−/−mice. Our results indicate that IEC expression of TNFAIP3 alters AMP expression and allows microbial colonization of the inner mucus layer, which activates an IL-10-dependent anti-inflammatory process that is necessary to prevent colitis.