Repair of DNA double-strand breaks is crucial for maintaining genome integrity and is governed by post-translational modifications such as protein ubiquitylation. Here, we establish that the deubiquitylating enzyme USP4 promotes DNA-end resection and DNA repair by homologous recombination. We also report that USP4 interacts with CtIP and the MRE11-RAD50-NBS1 (MRN) complex and is required for CtIP recruitment to DNA damage sites. Furthermore, we show that USP4 is ubiquitylated on multiple sites including those on cysteine residues and that deubiquitylation of these sites requires USP4 catalytic activity and is required for USP4 to interact with CtIP/MRN and to promote CtIP recruitment and DNA repair. Lastly, we establish that regulation of interactor binding by ubiquitylation occurs more generally among USP-family enzymes. Our findings thus identify USP4 as a novel DNA repair regulator and invoke a model in which ubiquitin adducts regulate USP enzyme interactions and functions.