The human USP7 deubiquitinating enzyme was shown to regulate many proteins involved in the cell cycle, as well as tumor suppressors and oncogenes. Thus, USP7 offers a promising, strategic target for cancer therapy. Using biochemical assays and activity-based protein profiling in living systems, we identified small-molecule antagonists of USP7 and demonstrated USP7 inhibitor occupancy and selectivity in cancer cell lines. These compounds bind USP7 in the active site through a covalent mechanism. In cancer cells, these active-site-targeting inhibitors were shown to regulate the level of several USP7 substrates and thus recapitulated the USP7 knockdown phenotype that leads to G1 arrest in colon cancer cells. The data presented in this report provide proof of principle that USP7 inhibitors may be a valuable therapeutic for cancer. In addition, the discovery of such molecules offers interesting tools for studying deubiquitination.