Protein ubiquitylation is a dynamic process that affects the function and stability of proteins and controls essential cellular processes ranging from cell proliferation to cell death. This process is regulated through the balanced action of E3 ubiquitin ligases and deubiquitylating enzymes (DUB) which conjugate ubiquitins to, and remove them from target proteins, respectively. Our genetic analysis has revealed that the deubiquitylating enzyme DmUsp5 is required for maintenance of the ubiquitin equilibrium, cell survival and normal development in Drosophila. Loss of the DmUsp5 function leads to late larval lethality accompanied by the induction of apoptosis. Detailed analyses at a cellular level demonstrated that DmUsp5 mutants carry multiple abnormalities, including a drop in the free monoubiquitin level, the excessive accumulation of free polyubiquitins, polyubiquitylated proteins and subunits of the 26S proteasome. A shortage in free ubiquitins results in the induction of a ubiquitin stress response previously described only in the unicellular budding yeast. It is characterized by the induction of the proteasome-associated deubiquitylase DmUsp14 and sensitivity to cycloheximide. Removal of DmUsp5 also activates the pro-apoptotic machinery thereby resulting in widespread apoptosis, indicative of an anti-apoptotic role of DmUsp5. Collectively, the pleiotropic effects of a loss of DmUsp5 function can be explained in terms of the existence of a limited pool of free monoubiquitins which makes the ubiquitin-dependent processes mutually interdependent.