Protein ubiquitylation is a key process in the regulation of many cellular processes. The balance between the activity of ubiquitin ligases and that of proteases controls the level of ubiquitylation. In response to extracellular stimuli, stress-activated protein kinases (SAPK) modulate gene expression to maximize cell survival. In yeast, the Hog1 SAPK has a key role in reprogramming the gene expression pattern required for cell survival upon osmostress. Here, we show that the Ubp3 ubiquitin protease is a target for the Hog1 SAPK to modulate gene expression. ubp3 mutant cells are defective in expression of osmoresponsive genes. Hog1 interacts with and phosphorylates Ubp3 at serine 695, which is essential to determine the extent of transcriptional activation in response to osmostress. Furthermore, Ubp3 is recruited to osmoresponsive genes to modulate transcriptional initiation as well as elongation. Therefore, Ubp3 activity responds to external stimuli and is required for transcriptional activation upon osmostress.