Ubiquitination of proteins is now recognized to target proteins for degradation by the proteasome and for internalization into the lysosomal system, as well as to modify functions of some target proteins. Although much progress has been made in characterizing enzymes that link ubiquitin to proteins, our understanding of deubiquitinating enzymes is less developed. These enzymes are involved in processing the products of ubiquitin genes which all encode fusion proteins, in negatively regulating the functions of ubiquitination (editing), in regenerating free ubiquitin after proteins have been targeted to the proteasome or lysosome (recycling) and in salvaging ubiquitin from possible adducts formed with small molecule nucleophiles in the cell. A large number of genes encode deubiquitinating enzymes suggesting that many have highly specific and regulated functions. Indeed, recent findings provide strong support for the concept that ubiquitination is regulated by both specific pathways of ubiquitination and deubiquitination. Interestingly, many of these enzymes are localized to subcellular structures or to molecular complexes. These localizations play important roles in determining specificity of function and can have major influences on their catalytic activities. Future studies, particularly aimed at characterizing the interacting partners and potential substrates in these complexes as well as at determining the effects of loss of function of specific deubiquitinating enzymes will rapidly advance our understanding of the important roles of these enzymes as biological regulators.