Inheritance of a coding variant of the protein tyrosine phosphatase nonreceptor type 22 (PTPN22) gene is associated with increased susceptibility to autoimmunity and infection. Efforts to elucidate the mechanisms by which the PTPN22-C1858T variant modulates disease risk revealed that PTPN22 performs a signaling function in multiple biochemical pathways and cell types. Capable of both enzymatic activity and adaptor functions, PTPN22 modulates signaling through antigen and innate immune receptors. PTPN22 plays roles in lymphocyte development and activation, establishment of tolerance, and innate immune cell-mediated host defense and immunoregulation. The disease-associated PTPN22-R620W variant protein is likely involved in multiple stages of the pathogenesis of autoimmunity. Establishment of a tolerant B cell repertoire is disrupted by PTPN22-R620W action during immature B cell selection, and PTPN22-R620W alters mature T cell responsiveness. However, after autoimmune attack has initiated tissue injury, PTPN22-R620W may foster inflammation through modulating the balance of myeloid cell-produced cytokines.