TNF is a pleiotropic cytokine required for normal development and function of the immune system; however, TNF overexpression also induces inflammation and is associated with autoimmune diseases. TNF exists as both a soluble and a transmembrane protein. Genetic studies in mice have suggested that inflammation in disease models involves soluble TNF (solTNF) and that maintenance of innate immune function involves transmembrane TNF (tmTNF). These findings imply that selective pharmacologic inhibition of solTNF may be anti-inflammatory and yet preserve innate immunity to infection. To address this hypothesis, we now describe dominant-negative inhibitors of TNF (DN-TNFs) as a new class of biologics that selectively inhibits solTNF. DN-TNFs blocked solTNF activity in human and mouse cells, a human blood cytokine release assay, and two mouse arthritis models. In contrast, DN-TNFs neither inhibited the activity of human or mouse tmTNF nor suppressed innate immunity to Listeria infection in mice. These results establish DN-TNFs as the first selective inhibitors of solTNF, demonstrate that inflammation in mouse arthritis models is primarily driven by solTNF, and suggest that the maintenance of tmTNF activity may improve the therapeutic index of future anti-inflammatory agents.