Engagement of TNF receptor 1 by TNFalpha activates the transcription factor NF-kappaB but can also induce apoptosis. Here we show that upon TNFalpha binding, TNFR1 translocates to cholesterol- and sphingolipid-enriched membrane microdomains, termed lipid rafts, where it associates with the Ser/Thr kinase RIP and the adaptor proteins TRADD and TRAF2, forming a signaling complex. In lipid rafts, TNFR1 and RIP are ubiquitylated. Furthermore, we provide evidence that translocation to lipid rafts precedes ubiquitylation, which leads to the degradation via the proteasome pathway. Interfering with lipid raft organization not only abolishes ubiquitylation but switches TNFalpha signaling from NF-kappaB activation to apoptosis. We suggest that lipid rafts are crucial for the outcome of TNFalpha-activated signaling pathways.