Ubiquitin-specific protease (USP)1 is a member of the USP family of deubiquitinating enzymes. Efficient USP1 activity requires binding to its cofactor USP1-associated factor 1 (UAF1), and the USP1-UAF1 deubiquitinase complex has important roles in regulating DNA damage-related processes. USPs show common folding of their catalytic domain, with three subdomains termed Thumb, Palm, and Fingers. The Fingers subdomain appears to be the primary site for ubiquitin binding. In USP1, the Fingers subdomain also mediates its interaction with UAF1, and thus represents a crucial, but poorly characterized, motif in USP1. To explore the role of USP1-UAF1 in ubiquitin-dependent nuclear processes, we tested the effect of modulating USP1-UAF1 activity on the level and/or localization of conjugated ubiquitin and the DNA damage-related proteins phosphorylated histone H2AX, Lys56-acetylated histone H3, and p53-binding protein 1 (53BP1). Small interfering RNA-mediated USP1 knockdown or treatment with the novel USP1-UAF1 inhibitor ML323 increased the recruitment of conjugated ubiquitin and 53BP1 into nuclear foci. Strikingly, ectopic coexpression of USP1 and UAF1 depleted conjugated ubiquitin in the nucleus and blocked the recruitment of 53BP1 to DNA damage foci. In a direct comparison with other overexpressed USPs, USP1-UAF1 behaved as a relatively promiscuous deubiquitinase. Experimental and cancer-related mutations in the USP1 The Fingers subdomain abrogated substrate deubiquitination without interfering with other USP1 activities, such as UAF1 binding or autocleavage. These results provide new insights into the function and regulation of the USP1-UAF1 complex.