Autoimmune diseases, such as systemic lupus erythematosus and rheumatoid arthritis, result from a loss of tolerance to self-antigens and immune-mediated injury precipitated by the overproduction of type I IFN and inflammatory cytokines. We have identified the inositol 5' phosphatase SHIP-1 as a negative regulator of TLR3-induced type I IFN production. SHIP-1-deficient macrophages display enhanced TLR-induced IFN-beta production, and overexpression of SHIP-1 negatively regulates the ability of TLR3 and its adaptor, Toll/IL-1 receptor domain-containing adaptor-inducing IFN-beta, to induce IFN-beta promoter activity, indicating that SHIP-1 negatively regulates TLR-induced IFN-beta production. Further dissection of the IFN-beta pathway implicates TANK-binding kinase 1 (TBK1) as the target for SHIP-1. Critically, in the absence of SHIP-1, TBK1 appears to be hyperphosphorylated both in unstimulated cells and following TLR3 stimulation. In addition, TBK1 appears to be constitutively associated with Toll/IL-1 receptor domain-containing adaptor-inducing IFN-beta and TNFR-associated factor 3 in SHIP-1 deficient cells, whereas in wild-type cells this association is inducible following TLR3 stimulation. In support of a role for SHIP-1 in regulating complex formation, confocal microscopy demonstrates that TBK1 distribution in the cell is significantly altered in SHIP-1-deficient cells, with more prominent endosomal staining observed, compared with wild-type controls. Taken together, our results point to SHIP-1 as a critical negative regulator of IFN-beta production downstream of TLR3 through the regulation of TBK1 localization and activity.