Lymphocyte infiltration into epithelial tissues and proinflammatory cytokine release are key steps in autoimmune disease. Although cell-autonomous roles of lymphocytes are well studied in autoimmunity, much less is understood about the stromal factors that dictate immune cell function. Tissue inhibitor of metalloproteinases 3 (TIMP3) controls systemic cytokine bioavailability and signaling by inhibiting the ectodomain shedding of cytokines and their receptors. The role of TIMP3 in cytokine biology is emerging; however, its contribution to cellular immunology remains unknown. In this study, we show that TIMP3 produced by the hepatic stroma regulates the basal lymphocyte populations in the liver and prevents autoimmune hepatitis. TIMP3 deficiency in mice led to spontaneous accumulation and activation of hepatic CD4(+), CD8(+), and NKT cells. Treatment with Con A in a model of polyclonal T lymphocyte activation resulted in a greatly enhanced Th1 cytokine response and acute liver failure, which mechanistically depended on TNF signaling. Bone marrow chimeras demonstrated that TIMP3 derived from the stromal rather than hematopoietic compartment provided protection against autoimmunity. Finally, we identified hepatocytes as the major source of Timp3 in a resting liver, whereas significant Timp3 gene transcription was induced by hepatic stellate cells in the inflamed liver. These results uncover metalloproteinase inhibitors as critical stromal factors in regulating cellular immunity during autoimmune hepatitis.