Druggable proteins required for B lymphocyte survival and immune responses are an emerging source of new treatments for autoimmunity and lymphoid malignancy. In this study, we show that mice with an inactivating mutation in the intramembrane protease signal peptide peptidase-like 2A (SPPL2A) unexpectedly exhibit profound humoral immunodeficiency and lack mature B cell subsets, mirroring deficiency of the cytokine B cell-activating factor (BAFF). Accumulation of Sppl2a-deficient B cells was rescued by overexpression of the BAFF-induced survival protein B cell lymphoma 2 (BCL2) but not BAFF and was distinguished by low surface BAFF receptor and IgM and IgD B cell receptors. CD8-negative dendritic cells were also greatly decreased. SPPL2A deficiency blocked the proteolytic processing of CD74 MHC II invariant chain in both cell types, causing dramatic build-up of the p8 product of Cathepsin S and interfering with earlier steps in CD74 endosomal retention and processing. The findings illuminate an important role for the final step in the CD74-MHC II pathway and a new target for protease inhibitor treatment of B cell diseases.