Increasing incidence of inflammatory bowel disorders demands a better understanding of the molecular mechanisms underlying its multifactorial aetiology. Here we demonstrate that mice deficient for REGγ, a proteasome activator, show significantly attenuated intestinal inflammation and colitis-associated cancer in dextran sodium sulfate model. Bone marrow transplantation experiments suggest that REGγ's function in non-haematopoietic cells primarily contributes to the phenotype. Elevated expression of REGγ exacerbates local inflammation and promotes a reciprocal regulatory loop with NFκB involving ubiquitin-independent degradation of IκBɛ. Additional deletion of IκBɛ restored colitis phenotypes and inflammatory gene expression in REGγ-deficient mice. In sum, this study identifies REGγ-mediated control of IκBɛ as a molecular mechanism that contributes to NFκB activation and promotes bowel inflammation and associated tumour formation in response to chronic injury.