Tumor necrosis factor (TNF) is a potent cytokine exerting critical functions in the activation and regulation of immune and inflammatory responses. Due to its pleiotropic activities, the amplitude and duration of TNF function must be tightly regulated. One of the mechanisms that may have evolved to modulate TNF function is the proteolytic cleavage of its cell surface receptors. In humans, mutations affecting shedding of the p55TNF receptor (R) have been linked with the development of the TNFR-associated periodic syndromes, disorders characterized by recurrent fever attacks and localized inflammation. Here we show that knock-in mice expressing a mutated nonsheddable p55TNFR develop Toll-like receptor-dependent innate immune hyperreactivity, which renders their immune system more efficient at controlling intracellular bacterial infections. Notably, gain of function for antibacterial host defenses ensues at the cost of disbalanced inflammatory reactions that lead to pathology. Mutant mice exhibit spontaneous hepatitis, enhanced susceptibility to endotoxic shock, exacerbated TNF-dependent arthritis, and experimental autoimmune encephalomyelitis. These results introduce a new concept for receptor shedding as a mechanism setting up thresholds of cytokine function to balance resistance and susceptibility to disease. Assessment of p55TNFR shedding may thus be of prognostic value in infectious, inflammatory, and autoimmune diseases.