Abstract BAFF and a proliferation-inducing ligand (APRIL), which control B cell homeostasis, are therapeutic targets in autoimmune diseases. TACI-Fc (atacicept), a soluble fusion protein containing the extracellular domain of the BAFF–APRIL receptor TACI, was applied in clinical trials. However, disease activity in multiple sclerosis unexpectedly increased, whereas in systemic lupus erythematosus, atacicept was beneficial. In this study, we show that an endogenous soluble TACI (sTACI) exists in vivo. TACI proteolysis involved shedding by a disintegrin and metalloproteinase 10 releasing sTACI from activated B cells. The membrane-bound stub was subsequently cleaved by γ-secretase reducing ligand-independent signaling of the remaining C-terminal fragment. The shed ectodomain assembled ligand independently in a homotypic way. It functioned as a decoy receptor inhibiting BAFF- and APRIL-mediated B cell survival and NF-κB activation. We determined sTACI levels in autoimmune diseases with established hyperactivation of the BAFF–APRIL system. sTACI levels were elevated both in the cerebrospinal fluid of the brain-restricted autoimmune disease multiple sclerosis correlating with intrathecal IgG production, as well as in the serum of the systemic autoimmune disease systemic lupus erythematosus correlating with disease activity. Together, we show that TACI is sequentially processed by a disintegrin and metalloproteinase 10 and γ-secretase. The released sTACI is an immunoregulator that shares decoy functions with atacicept. It reflects systemic and compartmentalized B cell accumulation and activation.