Ubiquitin-mediated inactivation of caspases has long been postulated to contribute to the regulation of apoptosis. However, detailed mechanisms and functional consequences of caspase ubiquitylation have not been demonstrated. Here we show that the Drosophila Inhibitor of Apoptosis 1, DIAP1, blocks effector caspases by targeting them for polyubiquitylation and nonproteasomal inactivation. We demonstrate that the conjugation of ubiquitin to drICE suppresses its catalytic potential in cleaving caspase substrates. Our data suggest that ubiquitin conjugation sterically interferes with substrate entry and reduces the caspase's proteolytic velocity. Disruption of drICE ubiquitylation, either by mutation of DIAP1's E3 activity or drICE's ubiquitin-acceptor lysines, abrogates DIAP1's ability to neutralize drICE and suppress apoptosis in vivo. We also show that DIAP1 rests in an "inactive" conformation that requires caspase-mediated cleavage to subsequently ubiquitylate caspases. Taken together, our findings demonstrate that effector caspases regulate their own inhibition through a negative feedback mechanism involving DIAP1 "activation" and nondegradative polyubiquitylation.