Toxin-secreting "killer" yeasts were initially identified >40 years ago in Saccharomyces cerevisiae strains infected with a double-stranded RNA "killer" virus. Despite extensive research conducted on yeast killer toxins, the mechanism of protecting immunity by which toxin-producing cells evade the lethal activities of these proteins has remained elusive. Here, we identify the mechanism leading to protecting immunity in a killer yeast secreting a viral alpha/beta protein toxin (K28) that enters susceptible cells by receptor-mediated endocytosis and, after retrograde transport into the cytosol, blocks DNA synthesis, resulting in both cell-cycle arrest and caspase-mediated apoptosis. We demonstrate that toxin immunity is effected within the cytosol of a toxin-secreting yeast and occurs via the formation of complexes between reinternalized toxin and unprocessed precursor moieties that are subsequently ubiquitinated and proteasomally degraded, eliminating the active form of the toxin. Interference with cellular ubiquitin homeostasis, either through overexpression of mutated ubiquitin (Ub-RR(48/63)) or by blocking deubiquitination, prevents ubiquitination of toxin and results in an impaired immunity and the expression of a suicidal phenotype. The results presented here reveal the uniquely elegant and efficient strategy that killer cells have developed to circumvent the lethal effects of the toxin they produce.