NF-kappaB is a central mediator of innate immunity and contributes to the pathogenesis of several renal diseases. FAT10 is a TNF-alpha-inducible ubiquitin-like protein with a putative role in immune response, but whether FAT10 participates in TNF-alpha-induced NF-kappaB activation is unknown. Here, using renal tubular epithelial cells (RTECs) derived from FAT10(-/-) and FAT10(+/+) mice, we observed that FAT10 deficiency abrogated TNF-alpha-induced NF-kappaB activation and reduced the induction of NF-kappaB-regulated genes. Despite normal IkBalpha degradation and polyubiquitination, FAT10 deficiency impaired TNF-alpha-induced IkBalpha degradation and nuclear translocation of p65 in RTECs, suggesting defective proteasomal degradation of polyubiquitinated IkBalpha. In addition, FAT10 deficiency reduced the expression of the proteasomal subunit low molecular mass polypeptide 2 (LMP2). Transduction of FAT10(-/-) RTECs with FAT10 restored LMP2 expression, TNF-alpha-induced IkBalpha degradation, p65 nuclear translocation, and NF-kappaB activation. Furthermore, LMP2 transfection restored IkBalpha degradation in FAT10(-/-) RTECs. In humans, common types of chronic kidney disease associated with tubulointerstitial upregulation of FAT10. These data suggest that FAT10 mediates NF-kappaB activation and may promote tubulointerstitial inflammation in chronic kidney diseases.