Updated project metadata. Type-I interferon (IFN-I) secretion provides a rapid host defense against infection with RNA-viruses. Upon entry into the host cell, the viral RNA triggers the activation of both RIG-I and TLR3 signaling pathways, ultimately leading to the production of type-I interferons. Since an exaggerated IFNa/b response can cause severe tissue damage, these pathways are tightly regulated. One of the factors that keep the type 1 IFN response in check is the ubiquitin-like modifier FAT10. FAT10 is expressed upon synergistic stimulation with TNFα and IFNγ, and it targets covalently FAT10-linked substrate proteins for proteasomal degradation. However, the mechanism how FAT10 modulates IFN-I secretion remains to be fully elucidated. Here, we found that FAT10 is phosphorylated by Ikb kinase b (IKKβ) upon TNFα stimulation and during Influenza Virus infection on several serine and threonine residues. FAT10 phosphorylation increases the binding of FAT10 to the TRAF3-deubiquitylase OTUB1 and its FAT10-mediated activation. Consistently, FAT10 phosphorylation results in a low ubiquitylation state of TRAF3 which is unable to maintain IRF3 phosphorylation and downstream induction of type 1 IFNs. Taken together, we reveal a mechanism how the TNF-induced phosphorylation of FAT10 limits the production of tissue destructive IFN-I in inflammation.