The ubiquitin-specific processing protease (UBP) family of deubiquitinating enzymes plays an essential role in numerous cellular processes. Mammalian USP14 (Ubp6 in yeast) is unique among known UBP enzymes in that it is activated catalytically upon specific association with the 26S proteasome. Here, we report the crystal structures of the 45-kDa catalytic domain of USP14 in isolation and in a complex with ubiquitin aldehyde, which reveal distinct structural features. In the absence of ubiquitin binding, the catalytic cleft leading to the active site of USP14 is blocked by two surface loops. Binding by ubiquitin induces a significant conformational change that translocates the two surface loops thereby allowing access of the ubiquitin C-terminus to the active site. These structural observations, in conjunction with biochemical characterization, identify important regulatory mechanisms for USP14.