Degradation of proteins by the ubiquitin system involves two discrete steps. Initially, ubiquitin is covalently linked in an ATP-dependent mode to the protein substrate. The protein moiety of the conjugate is subsequently degraded by a specific protease into peptides and free amino acids with the release of free and reutilizable ubiquitin. The degradation process also requires energy. In this review we shall discuss the mechanisms involved in ubiquitin activation, selection of substrates for conjugation, and subsequent degradation of ubiquitin-conjugated proteins. In addition, we shall briefly summarize what is currently known of the role of the ubiquitin system in protein degradation in vitro and in vivo.