Using targeted mutagenesis in mice, we have blocked shedding of endogenous murine TNF by deleting its cleavage site. Mutant mice produce physiologically regulated levels of transmembrane TNF (tmTNF), which suffice to support thymocyte proliferation but cannot substitute for the hepatotoxic activities of wild-type TNF following LPS/D-galactosamine challenge in vivo and are not sufficient to support secondary lymphoid organ structure and function. Notably, however, tmTNF is capable of exerting anti-Listerial host defenses while remaining inadequate to mediate arthritogenic functions, as tested in the tristetraprolin-deficient model of TNF-dependent arthritis. Most interestingly, in the EAE model of autoimmune demyelination, tmTNF suppresses disease onset and progression and retains the autoimmune suppressive properties of wild-type TNF. Together, these results indicate that tmTNF preserves a subset of the beneficial activities of TNF while lacking detrimental effects. These data support the hypothesis that selective targeting of soluble TNF may offer several advantages over complete blockade of TNF in the treatment of chronic inflammation and autoimmunity.