NF-κB essential modulator (NEMO) and cylindromatosis protein (CYLD) are intracellular proteins that regulate the NF-κB signaling pathway. Although mice with either CYLD deficiency or an alteration in the zinc finger domain of NEMO (K392R) are born healthy, we found that the combination of these two gene defects in double mutant (DM) mice is early embryonic lethal but can be rescued by the absence of TNF receptor 1 (TNFR1). Notably, NEMO was not recruited into the TNFR1 complex of DM cells, and consequently NF-κB induction by TNF was severely impaired and DM cells were sensitized to TNF-induced cell death. Interestingly, the TNF signaling defects can be fully rescued by reconstitution of DM cells with CYLD lacking ubiquitin hydrolase activity but not with CYLD mutated in TNF receptor-associated factor 2 (TRAF2) or NEMO binding sites. Therefore, our data demonstrate an unexpected non-catalytic function for CYLD as an adapter protein between TRAF2 and the NEMO zinc finger that is important for TNF-induced NF-κB signaling during embryogenesis.