Peripheral blood monocytes are plastic cells that migrate to tissues and differentiate into various cell types, including macrophages, dendritic cells, and osteoclasts. We have described the migration of cellular inhibitor of apoptosis protein 1 (cIAP1), a member of the IAP family of proteins, from the nucleus to the Golgi apparatus in monocytes undergoing differentiation into macrophages. Here we show that, once in the cytoplasm, cIAP1 is involved in the degradation of the adaptor protein tumor necrosis factor receptor-associated factor 2 (TRAF2) by the proteosomal machinery. Inhibition of cIAP1 prevents the decrease in TRAF2 expression that characterizes macrophage formation. We demonstrate that TRAF2 is initially required for macrophage differentiation as its silencing prevents Ikappa-Balpha degradation, nuclear factor-kappaB (NF-kappaB) p65 nuclear translocation, and the differentiation process. Then, we show that cIAP1-mediated degradation of TRAF2 allows the differentiation process to progress. This degradation is required for the macrophages to be fully functional as TRAF2 overexpression in differentiated cells decreases the c-Jun N-terminal kinase-mediated synthesis and the secretion of proinflammatory cytokines, such as interleukin-8 and monocyte chemoattractant protein 1 (MCP-1) in response to CD40 ligand. We conclude that TRAF2 expression and subsequent degradation are required for the differentiation of monocytes into fully functional macrophages.