Interleukin-2 (IL-2) is a pleiotropic cytokine that regulates lymphocyte proliferation and peripheral tolerance. IL-2 activates mitogen-activated protein kinase (MAPK), phosphatidylinositol 3-kinase, and signal transducer and activator of transcription (STAT) pathways and modulates expression of target genes. Systematic analysis of IL-2 target genes has revealed regulation of potential feedback inhibitors of IL-2 signaling, including several suppressor of cytokine signaling (SOCS) family members as well as MAPK pathway-regulating dual specificity phosphatases (DUSPs). Here we have evaluated the in vivo actions of DUSP5, an extracellular signal-regulated kinase 1/2 (ERK1/2)-specific phosphatase, by generating transgenic mice overexpressing DUSP5 within the lymphoid compartment. We show that transgenic DUSP5 expression results in a block in thymocyte development at the double positive stage. We also demonstrate that DUSP5-expressing mature T cells exhibit decreased IL-2-dependent proliferation and defective IL-2-mediated induction of genes. Finally, DUSP5 transgenic mice develop autoimmune symptoms, suggesting a role for the MAPK pathway in the regulation of tolerance. Thus, proper regulation of DUSP5 activity is critical for normal immune system development, IL-2 actions, and tolerance.