USP38 is a deubiquitinating enzyme that cleaves ubiquitin chains from target proteins and so controls their stability or activity. It acts in several cellular processes, including DNA repair, cell cycle regulation and the immune response. Its substrates and the chain linkages it removes are specific: it can remove 'Lys-48'-, 'Lys-63'-, 'Lys-27'- and 'Lys-33'-linked ubiquitin, depending on the target.

In innate immunity, USP38 helps to inhibit type I interferon signalling by mediating the 'Lys-33' to 'Lys-48' ubiquitination transition of TBK1, which leads to TBK1 degradation. It is constitutively associated with the IL-33 receptor IL1RL1 and removes its 'Lys-27'-linked polyubiquitination, resulting in autophagic degradation of the receptor. It also takes part in the antiviral response by removing 'Lys-48'- and 'Lys-63'-linked polyubiquitin from Zika virus envelope protein E.

USP38 also acts on chromatin-associated proteins. It cleaves the ubiquitin chain from the histone demethylase LSD1/KDM1A, preventing degradation by the 26S proteasome and maintaining LSD1 levels. In the DNA damage response it removes 'Lys-63'-linked ubiquitin chains that promote HDAC1 deacetylase activity, and it cleaves 'Lys-63'-linked chains on HDAC3 to lower its histone deacetylase activity. It regulates MYC levels and cell proliferation by antagonising the E3 ligase FBXW7, preventing 'Lys-48'-linked ubiquitination and degradation of MYC.

The USP38 gene belongs to the HGNC group of ubiquitin specific peptidases; the previous name was ubiquitin specific protease 38. The protein is found in the cytoplasm and nucleus, and the mouse ortholog is Usp38.