Ubiquitin-dependent processes control much of cellular physiology. We show that expression of a highly active, Epstein-Barr virus-derived deubiquitylating enzyme (EBV-DUB) blocks proteasomal degradation of cytosolic and ER-derived proteins by preemptive removal of ubiquitin from proteasome substrates, a treatment less toxic than the use of proteasome inhibitors. Recognition of misfolded proteins in the ER lumen, their dislocation to the cytosol, and degradation are usually tightly coupled but can be uncoupled by the EBV-DUB: a misfolded glycoprotein that originates in the ER accumulates in association with cytosolic chaperones as a deglycosylated intermediate. Our data underscore the necessity of a DUB activity for completion of the dislocation reaction and provide a new means of inhibition of proteasomal proteolysis with reduced cytotoxicity.