Cytokines are small proteins responsible for intercellular signalling during immune responses and implicated in the pathogenesis of systemic lupus erythematosus (SLE). We previously found that rare coding variant in lupus-risk genes are found in most SLE patients, and that for most frequently mutated gene BLK, these variants resulted in impaired IFN regulation to contribute to autoimmune development 1. In an extension of that work, here we show functional consequences for rare variants in a second lupus-risk gene, SH2B3, encoding a negative regulator of JAK-STAT-mediated cytokine receptor signalling. Rare SH2B3 variants were more frequent among SLE patients than in healthy controls, and the individual variants unique to each group. In vitro assays demonstrated the majority of these patient-specific variants were loss-of-function (LOF) and unable to suppress IFNγR signalling. Through the use of CRISPR-Cas9 genome editing, we generated two mouse strains harbouring Sh2b3 variants orthologous to those in SLE patients. Haematological analysis of these mouse strains confirmed both variants are hypomorphic alleles. Furthermore, immunophenotyping revealed a defect in B cell development characterised by increase of immature, especially transitional B cells that can harbour considerable levels of autoreactivity2, which can contribute to autoimmunity if not anergised. Elevated transitional B cells were also observed in the original SLE patients. To assess self-tolerance, we utilised the SWHEL-mHEL3× model 3,4 that revealed a breach of B cell tolerance that predisposed to autoimmunity. Pristane treatment, which induces a lupus-like systemic autoimmune disease 5, resulted higher anti-DNA autoantibody production in both heterozygous and homozygous mice. Our results suggest that rare, damaging variants in SH2B3 enable breaches in B cell tolerance and predispose carriers to SLE upon environmental triggers.