Functional characterization of causal variants present on risk haplotypes identified through genome-wide association studies (GWAS) is a primary objective of human genetics. In this report, we evaluate the function of a pair of tandem polymorphic dinucleotides, 42 kb downstream of the promoter of TNFAIP3, (rs148314165, rs200820567, collectively referred to as TT>A) recently nominated as causal variants responsible for genetic association of systemic lupus erythematosus (SLE) with tumor necrosis factor alpha inducible protein 3 (TNFAIP3). TNFAIP3 encodes the ubiquitin-editing enzyme, A20, a key negative regulator of NF-κB signaling. A20 expression is reduced in subjects carrying the TT>A risk alleles; however, the underlying functional mechanism by which this occurs is unclear. We used a combination of electrophoretic mobility shift assays (EMSA), mass spectrometry (MS), reporter assays, chromatin immunoprecipitation-PCR (ChIP-PCR) and chromosome conformation capture (3C) EBV transformed lymphoblastoid cell lines (LCL) from individuals carrying risk and non-risk TNFAIP3 haplotypes to characterize the effect of TT>A on A20 expression. Our results demonstrate that the TT>A variants reside in an enhancer element that binds NF-κB and SATB1 enabling physical interaction of the enhancer with the TNFAIP3 promoter through long-range DNA looping. Impaired binding of NF-κB to the TT>A risk alleles or knockdown of SATB1 expression by shRNA, inhibits the looping interaction resulting in reduced A20 expression. Together, these data reveal a novel mechanism of TNFAIP3 transcriptional regulation and establish the functional basis by which the TT>A risk variants attenuate A20 expression through inefficient delivery of NF-κB to the TNFAIP3 promoter. These results provide critical functional evidence supporting a direct causal role for TT>A in the genetic predisposition to SLE.