Proteins that directly regulate tumour necrosis factor receptor (TNFR) signalling have critical roles in regulating cellular activation and survival. ABIN-1 (A20 binding and inhibitor of NF-kappaB) is a novel protein that is thought to inhibit NF-kappaB signalling. Here we show that mice deficient for ABIN-1 die during embryogenesis with fetal liver apoptosis, anaemia and hypoplasia. ABIN-1 deficient cells are hypersensitive to tumour necrosis factor (TNF)-induced programmed cell death, and TNF deficiency rescues ABIN-1 deficient embryos. ABIN-1 inhibits caspase 8 recruitment to FADD (Fas-associated death domain-containing protein) in TNF-induced signalling complexes, preventing caspase 8 cleavage and programmed cell death. Moreover, ABIN-1 directly binds polyubiquitin chains and this ubiquitin sensing activity is required for ABIN-1's anti-apoptotic activity. These studies provide insights into how ubiquitination and ubiquitin sensing proteins regulate cellular and organismal survival.