Variants in the gene locus encoding protein tyrosine phosphatase non-receptor type 2 (PTPN2) are associated with inflammatory disorders, including inflammatory bowel diseases, rheumatoid arthritis, and type 1 diabetes. The anti-inflammatory role of PTPN2 is highlighted by the fact that PTPN2-deficient mice die a few weeks after birth because of systemic inflammation and severe colitis. However, the tissues, cells, and molecular mechanisms that contribute to this phenotype remain unclear. Here, we demonstrate that myeloid cell-specific deletion of PTPN2 in mice (PTPN2-LysMCre) promotes intestinal inflammation but protects from colitis-associated tumor formation in an IL-1β-dependent manner. Elevated levels of mature IL-1β production in PTPN2-LysMCre mice are a consequence of increased inflammasome assembly due to elevated phosphorylation of the inflammasome adaptor molecule ASC. Thus, we have identified a dual role for myeloid PTPN2 in directly regulating inflammasome activation and IL-1β production to suppress pro-inflammatory responses during colitis but promote intestinal tumor development.