TRAF2 is an adaptor protein that regulates the activation of the c-Jun N-terminal kinase (JNK) and IkappaB kinase (IKK) signaling cascades in response to tumor necrosis factor alpha (TNF-alpha) stimulation. Although the downstream events in TNF-alpha signaling are better understood, the membrane-proximal events are still elusive. Here, we demonstrate that TNF-alpha and cellular stresses induce TRAF2 phosphorylation at serine 11 and that this phosphorylation is required for the expression of a subset of NF-kappaB target genes. Although TRAF2 phosphorylation had a minimal effect on the TNF-alpha-induced rapid and transient IKK activation, it was essential for secondary and prolonged IKK activation. Consistent with this, TRAF2 phosphorylation is not required for its recruitment to the TNFR1 complex in response to TNF-alpha stimulation but is required for its association with a cytoplasmic complex containing RIP1 and IKK. In addition, TRAF2 phosphorylation was essential for the full TNF-alpha-induced activation of JNK. Notably, TRAF2 phosphorylation increased both basal and inducible c-Jun and NF-kappaB activities and rendered cells resistant to stress-induced apoptosis. Moreover, TRAF2 was found to be constitutively phosphorylated in some lymphomas. These results unveil a new, finely tuned mechanism for TNF-alpha-induced IKK activation modulated by TRAF2 phosphorylation and suggest that TRAF2 phosphorylation contributes to elevated levels of basal NF-kappaB activity in certain human cancers.