Multiple autoimmune diseases, including type 1 diabetes, rheumatoid arthritis, Graves disease, and systemic lupus erythematosus, are associated with an allelic variant of protein tyrosine phosphatase nonreceptor 22 (PTPN22), which encodes the protein LYP. To model the human disease-linked variant LYP-R620W, we generated knockin mice expressing the analogous mutation, R619W, in the murine ortholog PEST domain phosphatase (PEP). In contrast with a previous report, we found that this variant exhibits normal protein stability, but significantly alters lymphocyte function. Aged knockin mice exhibited effector T cell expansion and transitional, germinal center, and age-related B cell expansion as well as the development of autoantibodies and systemic autoimmunity. Further, PEP-R619W affected B cell selection and B lineage–restricted variant expression and was sufficient to promote autoimmunity. Consistent with these features, PEP-R619W lymphocytes were hyperresponsive to antigen-receptor engagement with a distinct profile of tyrosine-phosphorylated substrates. Thus, PEP-R619W uniquely modulates T and B cell homeostasis, leading to a loss in tolerance and autoimmunity.