Abstract Background Oncoprotein Tax, encoded by the human T-cell leukemia virus type 1 (HTLV1), persistently induces NF-κB activation, which contributes to HTLV1-mediated T-cell transformation. Recent studies suggest that the signaling function of Tax requires its ubiquitination, although how the Tax ubiquitination is regulated remains unclear. Results We show here that the deubiquitinase CYLD physically interacts with Tax and negatively regulates the ubiquitination of this viral protein. This function of CYLD is associated with inhibition of Tax-mediated activation of IKK although not that of Tak1. Interestingly, CYLD undergoes constitutive phosphorylation in HTLV1-transformed T cells, a mechanism known to inactivate the catalytic activity of CYLD. Consistently, a phospho-mimetic CYLD mutant fails to inhibit Tax ubiquitination. Conclusion These findings suggest that CYLD negatively regulates the signaling function of Tax through inhibition of Tax ubiquitination. Conversely, induction of CYLD phosphorylation may serve as a mechanism by which HTLV1 overrides the inhibitory function of CYLD, leading to the persistent activation of NF-κB.