A dominant insertional P-element mutation enhances position-effect variegation in Drosophila melanogaster. The mutation is homozygous, viable, and fertile and maps at 64E on the third chromosome. The corresponding gene was cloned by transposon tagging. Insertion of the transposon upstream of the open reading frame correlates with a strong reduction of transcript level. A transgene was constructed with the cDNA and found to have the effect opposite from that of the mutation, namely, to suppress variegation. Sequencing of the cDNA reveals a large open reading frame encoding a putative ubiquitin-specific protease (Ubp). Ubiquitin marks various proteins, frequently for proteasome-dependent degradation. Ubps can cleave the ubiquitin part from these proteins. We discuss the link established here between a deubiquitinating enzyme and epigenetic silencing processes.