A previous report from this laboratory described two novel proteins that have sequence similarity to A20, a negative regulator of NF-kappaB (Evans, P. C., Taylor, E. R., Coadwell, J., Heyninck, K., Beyaert, R., and Kilshaw, P. J. (2001) Biochem. J. 357, 617-623). One of these molecules, cellular zinc finger anti-NF-kappaB (Cezanne), a 100-kDa cytoplasmic protein, also suppressed NF-kappaB. Here we demonstrate that Cezanne is a novel deubiquitinating enzyme, distinct from the two known families of deubiquitinases, Types I and II. We show that Cezanne contains an N-terminal catalytic domain that belongs to the recently discovered ovarian tumor protein (OTU) superfamily, a group of proteins displaying structural similarity to cysteine proteases but having no previously described function. Recombinant Cezanne cleaved ubiquitin monomers from linear or branched synthetic ubiquitin chains and from ubiquitinated proteins. Mutation of a conserved cysteine residue in the catalytic site of the proteolytic domain caused Cezanne to co-precipitate polyubiquitinated cellular proteins. We also provide evidence for an additional ubiquitin binding site in the C-terminal part of the molecule. Our data provide the first demonstration of functional activity among OTU proteins.