Ubiquitin carboxy-terminal hydrolase L5 (UCHL5) is a proteasome-associated deubiquitinating enzyme, which, along with RPN11 and USP14, is known to carry out deubiquitination on proteasome. As a member of the ubiquitin carboxy-terminal hydrolase (UCH) family, UCHL5 is unusual because, unlike UCHL1 and UCHL3, it can process polyubiquitin chain. However, it does so only when it is bound to the proteasome; in its free form, it is capable of releasing only relatively small leaving groups from the C-terminus of ubiquitin. Such a behavior might suggest at least two catalytically distinct forms of the enzyme, an apo form incapable of chain processing activity, and a proteasome-induced activated form capable of cleaving polyubiquitin chain. Through the crystal structure analysis of two truncated constructs representing the catalytic domain (UCH domain) of this enzyme, we were able to visualize a state of this enzyme that we interpret as its inactive form, because the catalytic cysteine appears to be in an unproductive orientation. While this work was in progress, the structure of a different construct representing the UCH domain was reported; however, in that work the structure reported was that of an inactive mutant [catalytic Cys to Ala; Nishio K et al. (2009) Biochem Biophys Res Commun390, 855–860], which precluded the observation that we are reporting here. Additionally, our structures reveal conformationally dynamic parts of the enzyme that may play a role in the structural transition to the more active form.