The SIR2, SIR3, and SIR4 proteins are required for silencing of transcription at the silent mating type loci and at telomeres in yeast. Using protein affinity chromatography, we show that SIR2, SIR3, and two proteins of 69 and 110 kDa tightly associate with SIR4. Surprisingly, the 110 kDa SIR4-binding protein is identical to UBP3, one of several previously described yeast enzymes that deubiquitinate target proteins. Deletion of the UBP3 gene results in markedly improved silencing of genes inserted either near a telomere or at one of the silent mating type loci, indicating that UBP3 is an inhibitor of silencing. We discuss possible roles for UBP3 in controlling the activity or assembly of the SIR protein complex.