Ubiquitin C-terminal hydrolases catalyze the removal of adducts from the C-terminus of ubiquitin. We have determined the crystal structure of the recombinant human Ubiquitin C-terminal Hydrolase (UCH-L3) by X-ray crystallography at 1.8 A resolution. The structure is comprised of a central antiparallel beta-sheet flanked on both sides by alpha-helices. The beta-sheet and one of the helices resemble the well-known papain-like cysteine proteases, with the greatest similarity to cathepsin B. This similarity includes the UCH-L3 active site catalytic triad of Cys95, His169 and Asp184, and the oxyanion hole residue Gln89. Papain and UCH-L3 differ, however, in strand and helix connectivity, which in the UCH-L3 structure includes a disordered 20 residue loop (residues 147-166) that is positioned over the active site and may function in the definition of substrate specificity. Based upon analogy with inhibitor complexes of the papain-like enzymes, we propose a model describing the binding of ubiquitin to UCH-L3. The UCH-L3 active site cleft appears to be masked in the unliganded structure by two different segments of the enzyme (residues 9-12 and 90-94), thus implying a conformational change upon substrate binding and suggesting a mechanism to limit non-specific hydrolysis.