IL-1 plays a major role in inflammation and autoimmunity through activation of nuclear factor κ B (NFκB) and MAPKs. Although a great deal is known about the mechanism of activation of NFκB and MAPKs by IL-1, much less is known about the down-regulation of this pathway. Suppressor of cytokine signaling (SOCS)-3 was shown to inhibit IL-1-induced transcription and activation of NFκB and the MAPKs JNK and p38, but the mechanism is unknown. We show here that SOCS-3 inhibits NFκB-dependent transcription induced by overexpression of the upstream IL-1 signaling molecules MyD88, IL-1R-activated kinase 1, TNF receptor-associated factor (TRAF)6, and TGFβ-activated kinase (TAK)1, but not when the MAP3K MAPK/ERK kinase kinase-1 is used instead of TAK1, indicating that the target for SOCS-3 is the TRAF6/TAK1 signaling complex. By coimmunoprecipitation, it was shown that SOCS-3 inhibited the association between TRAF6 and TAK1 and that SOCS-3 coimmunoprecipitated with TAK1 and TRAF6. Furthermore, SOCS-3 inhibited the IL-1-induced catalytic activity of TAK1. Because ubiquitination of TRAF6 is required for activation of TAK1, we analyzed the role of SOCS-3 on TRAF6 ubiquitination and found that SOCS-3 inhibited ubiquitin modification of TRAF6. These results indicate that SOCS-3 inhibits IL-1 signal transduction by inhibiting ubiquitination of TRAF6, thus preventing association and activation of TAK1.