The paracaspase MALT1 plays an important role in immune receptor-driven signaling pathways leading to NF-κB activation. MALT1 promotes signaling by acting as a scaffold, recruiting downstream signaling proteins, as well as by proteolytic cleavage of multiple substrates. However, the relative contributions of these two different activities to T and B cell function are not well understood. To investigate how MALT1 proteolytic activity contributes to overall immune cell regulation, we generated MALT1 protease-deficient mice (Malt1PD/PD) and compared their phenotype with that of MALT1 knockout animals (Malt1-/-). Malt1PD/PD mice displayed defects in multiple cell types including marginal zone B cells, B1 B cells, IL-10-producing B cells, regulatory T cells, and mature T and B cells. In general, immune defects were more pronounced in Malt1-/- animals. Both mouse lines showed abrogated B cell responses upon immunization with T-dependent and T-independent Ags. In vitro, inactivation of MALT1 protease activity caused reduced stimulation-induced T cell proliferation, impaired IL-2 and TNF-a production, as well as defective Th17 differentiation. Consequently, Malt1PD/PD mice were protected in a Th17-dependent experimental autoimmune encephalomyelitis model. Surprisingly, Malt1PD/PD animals developed a multiorgan inflammatory pathology, characterized by Th1 and Th2/0 responses and enhanced IgG1 and IgE levels, which was delayed by wild-type regulatory T cell reconstitution. We therefore propose that the pathology characterizing Malt1PD/PD animals arises from an immune imbalance featuring pathogenic Th1- and Th2/0-skewed effector responses and reduced immunosuppressive compartments. These data uncover a previously unappreciated key function of MALT1 protease activity in immune homeostasis and underline its relevance in human health and disease.