The transition from vegetative growth to multicellular development represents an evolutionary hallmark linked to an oxidative stress signal and controlled protein degradation. We identified the Sem1 proteasome subunit, which connects stress response and cellular differentiation. The sem1 gene encodes the fungal counterpart of the human Sem1 proteasome lid subunit and is essential for fungal cell differentiation and development. A sem1 deletion strain of the filamentous fungus Aspergillus nidulans is able to grow vegetatively and expresses an elevated degree of 20S proteasomes with multiplied ATP-independent catalytic activity compared to wildtype. Oxidative stress induces increased transcription of the genes sem1 and rpn11 for the proteasomal deubiquitinating enzyme. Sem1 is required for stabilization of the Rpn11 deubiquitinating enzyme, incorporation of the ubiquitin receptor Rpn10 into the 19S regulatory particle and efficient 26S proteasome assembly. Sem1 maintains high cellular NADH levels, controls mitochondria integrity during stress and developmental transition.