The growth factor progranulin (PGRN) has been implicated in embryonic development, tissue repair, tumorigenesis, and inflammation, but its receptors remain unidentified. We report that PGRN bound directly to tumor necrosis factor receptors (TNFRs) and disturbed the TNF alpha-TNFR interaction. PGRN-deficient mice were susceptible to collagen-induced arthritis, and administration of PGRN reversed inflammatory arthritis. Atsttrin, an engineered protein composed of three PGRN fragments, exhibited selective TNFR binding. PGRN and Atsttrin prevented inflammation in multiple arthritis mouse models and inhibited TNF alpha-activated intracellular signaling. Collectively, these findings demonstrate that PGRN is a ligand of TNFR, an antagonist of TNF alpha signaling, and plays a critical role in the pathogenesis of inflammatory arthritis in mice. They also suggest new potential therapeutic interventions for various TNF alpha-mediated pathologies and conditions, including rheumatoid arthritis.