Thousand-and-one-amino acid kinase 3 (TAOK3) is a serine and threonine kinase that belongs to the STE-20 family of kinases. Its absence reduces T cell receptor (TCR) signaling and increases the interaction of the tyrosine phosphatase SHP-1, a major negative regulator of proximal TCR signaling, with the kinase LCK, a component of the core TCR signaling complex. Here, we used mouse models and human cell lines to investigate the mechanism by which TAOK3 limits the interaction of SHP-1 with LCK. The loss of TAOK3 decreased the survival of naïve CD4+ T cells by dampening the transmission of tonic and ligand-dependent TCR signaling. In mouse T cells, Taok3 promoted the secretion of interleukin-2 (IL-2) in response to TCR activation in a manner that depended on Taok3 gene dosage and on Taok3 kinase activity. TCR desensitization in Taok3-/- T cells was caused by an increased abundance of Shp-1, and pharmacological inhibition of Shp-1 rescued the activation potential of these T cells. TAOK3 phosphorylated threonine-394 in the phosphatase domain of SHP-1, which promoted its ubiquitylation and proteasomal degradation. The loss of TAOK3 had no effect on the abundance of SHP-2, which lacks a residue corresponding to SHP-1 threonine-394. Modulation of SHP-1 abundance by TAOK3 thus serves as a rheostat for TCR signaling and determines the activation threshold of T lymphocytes.