The non-canonical NF-κB pathway forms a major arm of NF-κB signalling that mediates important biological functions, including lymphoid organogenesis, B-lymphocyte function, and cell growth and survival. Activation of the non-canonical NF-κB pathway involves degradation of an inhibitory protein, TNF receptor-associated factor 3 (TRAF3), but how this signalling event is controlled is still unknown. Here we have identified the deubiquitinase OTUD7B as a pivotal regulator of the non-canonical NF-κB pathway. OTUD7B deficiency in mice has no appreciable effect on canonical NF-κB activation but causes hyperactivation of non-canonical NF-κB. In response to non-canonical NF-κB stimuli, OTUD7B binds and deubiquitinates TRAF3, thereby inhibiting TRAF3 proteolysis and preventing aberrant non-canonical NF-κB activation. Consequently, the OTUD7B deficiency results in B-cell hyper-responsiveness to antigens, lymphoid follicular hyperplasia in the intestinal mucosa, and elevated host-defence ability against an intestinal bacterial pathogen, Citrobacter rodentium. These findings establish OTUD7B as a crucial regulator of signal-induced non-canonical NF-κB activation and indicate a mechanism of immune regulation that involves OTUD7B-mediated deubiquitination and stabilization of TRAF3.