Ubiquitination is essential for the endocytic sorting of various G protein-coupled receptors to lysosomes. Here we identify a distinct function of this covalent modification in controlling the later proteolytic processing of receptors. Mutation of all cytoplasmic lysine residues in the murine delta-opioid receptor blocked receptor ubiquitination without preventing ligand-induced endocytosis of receptors or their subsequent delivery to lysosomes, as verified by proteolysis of extramembrane epitope tags and down-regulation of radioligand binding to the transmembrane helices. Surprisingly, a functional screen revealed that the E3 ubiquitin ligase AIP4 specifically controls down-regulation of wild type receptors measured by radioligand binding without detectably affecting receptor delivery to lysosomes defined both immunochemically and biochemically. This specific AIP4-dependent regulation required direct ubiquitination of receptors and was also regulated by two deubiquitinating enzymes, AMSH and UBPY, which localized to late endosome/lysosome membranes containing internalized delta-opioid receptor. These results identify a distinct function of AIP4-dependent ubiquitination in controlling the later proteolytic processing of G protein-coupled receptors, without detectably affecting their endocytic sorting to lysosomes. We propose that ubiquitination or ubiquitination/deubiquitination cycling specifically regulates later proteolytic processing events required for destruction of the receptor's hydrophobic core.