LUBAC (linear ubiquitin chain assembly complex) activates the canonical NF‐κB pathway through linear polyubiquitination of NEMO (NF‐κB essential modulator, also known as IKKγ) and RIP1. However, the regulatory mechanism of LUBAC‐mediated NF‐κB activation remains elusive. Here, we show that A20 suppresses LUBAC‐mediated NF‐κB activation by binding linear polyubiquitin via the C‐terminal seventh zinc finger (ZF7), whereas CYLD suppresses it through deubiquitinase (DUB) activity. We determined the crystal structures of A20 ZF7 in complex with linear diubiquitin at 1.70–1.98 Å resolutions. The crystal structures revealed that A20 ZF7 simultaneously recognizes the Met1‐linked proximal and distal ubiquitins, and that genetic mutations associated with B cell lymphomas map to the ubiquitin‐binding sites. Our functional analysis indicated that the binding of A20 ZF7 to linear polyubiquitin contributes to the recruitment of A20 into a TNF receptor (TNFR) signalling complex containing LUBAC and IκB kinase (IKK), which results in NF‐κB suppression. These findings provide new insight into the regulation of immune and inflammatory responses.