In Saccharomyces cerevisiae histone H2B is ubiquitylated at lysine 123 in a process requiring the E2-ubiquitin conjugase, Rad6. We have analyzed gene expression in a strain containing a variant of histone H2B with lysine 123 converted to arginine to address the mechanisms by which ubiquitylation and deubiquitylation of histone H2B affect gene expression. The SAGA complex component, Ubp8, is one of two proteases that remove the ubiquitin moiety at lysine 123. We show that changes in gene expression observed upon deletion of ubp8 are suppressed by htb1 ( K123R ), which provides genetic evidence that Ubp8 alters gene expression through deubiquitylation of histone H2B. Microarray analyses of the htb1 ( K123R ) strain show that loss of histone ubiquitylation results in a twofold or greater change in expression of approximately 1.5% of the protein coding genes with approximately 75% of these increasing. For genes in which ubiquitylation represses expression, ubiquitylation principally acts through its effects on histone methylation. In contrast, decreased expression of the CWP1 gene was not paralleled by deletions of methyltransferase components and is thus likely independent of methylation. Finally, by comparing gene expression changes in the htb1 ( K123R ) strain with those in a strain deleted for rad6, we conclude that lysine 123 affects transcription primarily because of it being a site of ubiquitylation.