TNFα stimulates both pro- and anti-apoptotic signalling in hepatocytes. Anti-apoptotic signalling depends on a cascade of ubiquitylation steps leading to NFκB activation. Using Sharpin-deficient mice, we show that the ubiquitin binding protein Sharpin interacts with Hoip, an E3 ligase which generates linear ubiquitin chains. Sharpin-deficiency sensitized hepatocytes to induction of apoptosis by TNFα even in the absence of transcriptional inhibition. TNFα induced activation of NFκB was strongly reduced in hepatocytes from Sharpin-deficient mice, due to reduced and delayed phosphorylation and degradation of IκBα. Injection of TNFα-inducing lipopolysaccharides led to strongly exacerbated liver damage and premature death in Sharpin-deficient mice. Our findings point to an essential role of Sharpin in linear ubiquitin chain formation, NFκB activation, and protection of the liver against inflammatory damaging signals.