The severe acute respiratory syndrome coronavirus papain-like protease (SARS-CoV PLpro) is involved in the processing of the viral polyprotein and, thereby, contributes to the biogenesis of the virus replication complex. Structural bioinformatics has revealed a relationship for the SARS-CoV PLpro to herpesvirus-associated ubiquitin-specific protease (HAUSP), a ubiquitin-specific protease, indicating potential deubiquitinating activity in addition to its function in polyprotein processing (T. Sulea, H. A. Lindner, E. O. Purisima, and R. Menard, J. Virol. 79:4550-4551, 2005). In order to confirm this prediction, we overexpressed and purified SARS-CoV PLpro (amino acids [aa]1507 to 1858) from Escherichia coli. The purified enzyme hydrolyzed ubiquitin-7-amino-4-methylcoumarin (Ub-AMC), a general deubiquitinating enzyme substrate, with a catalytic efficiency of 13,100 M⁻¹s⁻¹, 220-fold more efficiently than the small synthetic peptide substrate Z-LRGG-AMC, which incorporates the C-terminal four residues of ubiquitin. In addition, SARS-CoV PLpro was inhibited by the specific deubiquitinating enzyme inhibitor ubiquitin aldehyde, with an inhibition constant of 210 nM. The purified SARS-CoV PLpro disassembles branched polyubiquitin chains with lengths of two to seven (Ub2-7) or four (Ub4) units, which involves isopeptide bond cleavage. SARS-CoV PLpro processing activity was also detected against a protein fused to the C terminus of the ubiquitin-like modifier ISG15, both in vitro using the purified enzyme and in HeLa cells by coexpression with SARS-CoV PLpro (aa 1198 to 2009). These results clearly establish that SARS-CoV PLpro is a deubiquitinating enzyme, thereby confirming our earlier prediction. This unexpected activity for a coronavirus papain-like protease suggests a novel viral strategy to modulate the host cell ubiquitination machinery to its advantage.