The RE1 silencing transcription factor (REST) is a repressor of neuronal differentiation and its elevated expression in neural cells blocks neuronal differentiation. In this study, we demonstrate a role for REST in the control of proliferation of medulloblastoma cells. REST expression decreased the levels of cyclin-dependent kinase (CDK)NIB/p27, a CDK inhibitor and a brake of cell proliferation in these cells. The reciprocal relationship between REST and p27 was validated in human tumor samples. REST knockdown in medulloblastoma cells derepessed a novel REST target gene encoding the deubiquitylase ubiquitin (Ub)-specific peptidase 37 (USP37). Ectopically expressed wild-type USP37 formed a complex with p27, promoted its deubiquitination and stabilization and blocked cell proliferation. Knockdown of REST and USP37 prevented p27 stabilization and blocked the diminution in proliferative potential that normally accompanied REST loss. Unexpectedly, wild-type USP37 expression also induced the expression of REST-target neuronal differentiation genes even though REST levels were unaffected. In contrast, a mutant of USP37 carrying a site-directed change in a conserved cysteine failed to rescue REST-mediated p27 destabilization, maintenance of cell proliferation and blockade to neuronal differentiation. Consistent with these findings, a significant correlation between USP37 and p27 was observed in patient tumors. Collectively, these findings provide a novel connection between REST and the proteasomal machinery in the control of p27 and cell proliferation in medulloblastoma cells.