Polyglutamine (polyQ) expansions cause neurodegeneration that is associated with protein misfolding and influenced by functional properties of the host protein. The polyQ disease protein, ataxin-3, has predicted ubiquitin-specific protease and ubiquitin-binding domains, which suggest that ataxin-3 functions in ubiquitin-dependent protein surveillance. Here we investigate direct links between the ubiquitin-proteasome pathway and ataxin-3. In neural cells we show that, through its ubiquitin interaction motifs (UIMs), normal or expanded ataxin-3 binds a broad range of ubiquitinated proteins that accumulate when the proteasome is inhibited. The expression of a catalytically inactive ataxin-3 (normal or expanded) causes ubiquitinated proteins to accumulate in cells, even in the absence of proteasome inhibitor. This accumulation of ubiquitinated proteins occurs primarily in the cell nucleus in transfected cells and requires intact UIMs in ataxin-3. We further show that both normal and expanded ataxin-3 can undergo oligoubiquitination. Although this post-translational modification occurs in a UIM-dependent manner, it becomes independent of UIMs when the catalytic cysteine residue of ataxin-3 is mutated, suggesting that ataxin-3 ubiquitination is itself regulated in trans by its own de-ubiquitinating activity. Finally, pulse-chase labeling reveals that ataxin-3 is degraded by the proteasome, with expanded ataxin-3 being as efficiently degraded as normal ataxin-3. Mutating the UIMs does not alter degradation, suggesting that UIM-mediated oligoubiquitination of ataxin-3 modulates ataxin-3 function rather than stability. The function of ataxin-3 as a de-ubiquitinating enzyme, its post-translational modification by ubiquitin, and its degradation via the proteasome link this polyQ protein to ubiquitin-dependent pathways already implicated in disease pathogenesis.