Signal transduction from toll-like receptors (TLRs) is important for innate immunity against infections, but deregulated TLR signalling contributes to inflammatory disorders. Here we show that myeloid cell-specific ablation of TRAF2 greatly promotes TLR-stimulated proinflammatory cytokine expression in macrophages and exacerbates colitis in an animal model of inflammatory bowel disease. TRAF2 deficiency does not enhance upstream signalling events, but it causes accumulation of two transcription factors, c-Rel and IRF5, known to mediate proinflammatory cytokine induction. Interestingly, TRAF2 controls the fate of c-Rel and IRF5 via a proteasome-dependent mechanism that also requires TRAF3 and the E3 ubiquitin ligase cIAP. We further show that TRAF2 also regulates inflammatory cytokine production in tumour-associated macrophages and facilitates tumour growth. These findings demonstrate an unexpected anti-inflammatory function of TRAF2 and suggest a proteasome-dependent mechanism that limits the proinflammatory TLR signalling.