Deregulation of the ubiquitin/proteasome system has been implicated in the pathogenesis of many human diseases, including cancer. Ubiquitin-specific proteases (USP) are cysteine proteases involved in the deubiquitination of protein substrates. Functional connections between USP7 and essential viral proteins and oncogenic pathways, such as the p53/Mdm2 and phosphatidylinositol 3-kinase/protein kinase B networks, strongly suggest that the targeting of USP7 with small-molecule inhibitors may be useful for the treatment of cancers and viral diseases. Using high-throughput screening, we have discovered HBX 41,108, a small-molecule compound that inhibits USP7 deubiquitinating activity with an IC(50) in the submicromolar range. Kinetics data indicate an uncompetitive reversible inhibition mechanism. HBX 41,108 was shown to affect USP7-mediated p53 deubiquitination in vitro and in cells. As RNA interference-mediated USP7 silencing in cancer cells, HBX 41,108 treatment stabilized p53, activated the transcription of a p53 target gene without inducing genotoxic stress, and inhibited cancer cell growth. Finally, HBX 41,108 induced p53-dependent apoptosis as shown in p53 wild-type and null isogenic cancer cell lines. We thus report the identification of the first lead-like inhibitor against USP7, providing a structural basis for the development of new anticancer drugs.