Intestinal exocrine secretory cells, including Paneth and goblet cells, have a pivotal role in intestinal barrier function and mucosal immunity. Dysfunction of these cells may lead to the pathogenesis of human diseases such as inflammatory bowel disease (IBD). Therefore, identification and elucidation of key molecular mechanisms that regulate the development and function of these exocrine cells would be crucial for understanding of disease pathogenesis and discovery of new therapeutic targets. The Ufm1 conjugation system is a novel ubiquitin-like modification system that consists of Ufm1 (Ubiquitin modifier 1), Uba5 (Ufm1-activating enzyme, E1), Ufc1 (Ufm1-conjugating enzyme, E2) and poorly characterized Ufm1 E3 ligase(s). Recent mouse genetic studies have demonstrated its indispensable role in embryonic development and hematopoiesis. Yet its role in other tissues and organs remains poorly defined. In this study, we found that both Ufl1 and Ufbp1, two key components of the Ufm1 E3 ligase, were highly expressed in the intestinal exocrine cells. Ablation of either Ufl1 and Ufbp1 led to significant loss of both Paneth and goblet cells, which in turn resulted in dysbiotic microbiota and increased susceptibility to experimentally induced colitis. At the cellular and molecular levels, Ufbp1 deficiency caused elevation of endoplasmic reticulum stress and activation of the Unfolded Protein Response (UPR) and cell death program. Administration of small molecular chaperone partially prevented loss of Paneth cells caused by acute Ufbp1 deletion. Taken together, our results have provided unambiguous evidence for the crucial role of the Ufm1 E3 ligase in maintenance of intestinal homeostasis and protection from inflammatory diseases.