The covalent modification of protein substrates by ubiquitin regulates a diverse range of critical biological functions. Although it has been established that ubiquitin-like modifiers evolved from prokaryotic sulphur transfer proteins it is less clear how complex eukaryotic ubiquitylation system arose and diversified from these prokaryotic antecedents. The discovery of ubiquitin, E1-like, E2-like and small-RING finger (srfp) protein components in the Aigarchaeota and the Asgard archaea superphyla has provided a substantive step toward addressing this evolutionary question. Encoded in operons, these components are likely representative of the progenitor apparatus that founded the modern eukaryotic ubiquitin modification systems. Here we report that these proteins from the archaeon Candidatus 'Caldiarchaeum subterraneum' operate together as a bona fide ubiquitin modification system, mediating a sequential ubiquitylation cascade reminiscent of the eukaryotic process. Our observations support the hypothesis that complex eukaryotic ubiquitylation signalling pathways have developed from compact systems originally inherited from an archaeal ancestor.