The paracaspase MALT1 plays an important role in signaling pathways leading to NF-kB activation. To investigate the contribution of its proteolytic activity to overall pathway regulation we generated MALT1 protease-deficient mice (Malt1PD/PD) and compared them to MALT1 KO animals (Malt1-/-). Malt1PD/PD mice displayed defects in multiple cell types including Treg, IL10-producing B cells and mature T and B cells. Immune defects were more pronounced in Malt1-/- animals. Both mouse lines showed abrogated B cell responses upon immunization and were protected in a Th17-dependent EAE model. Surprisingly, Malt1PD/PD animals developed a multi-organ inflammation characterized by Th2-type responses and enhanced IgG1 and IgE levels which was prevented by reconstitution with WT Treg. These data uncover a previously unappreciated key function of MALT1 protease activity in immune homeostasis and its relevance in human health and disease