USP7 (HAUSP) is a deubiquitinating enzyme, which plays a crucial role in regulating the levels of the p53 tumour suppressor protein, through its ability to prevent the proteasomal degradation of the Ubiquitin ligase for p53, Hdm2. Supporting evidence suggests that an inhibitor of USP7 would act to abrogate the action of Hdm2, and thereby elevate levels of the p53 protein, with associated therapeutic benefits in cancer and potentially other diseases. In this article, we describe the characterisation of differential enzyme activity of both the full length and putative catalytic domain of human USP7 expressed in both bacterial and insect cell expression systems. We also demonstrate the way in which variations in the reducing environment surrounding the enzyme can dramatically affect both the stability of the enzyme and the range of small molecules able to inhibit the catalytic activity of the enzyme. Furthermore, we describe the validation and use of this assay for a high-throughput screening approach, again highlighting the critical nature of the enzyme's environment. Taken together, these findings not only increase our understanding of the enzymatic activity of deubiquitinating enzymes, but also highlight several key considerations of importance in the development of therapeutic agents against this novel class of therapeutic targets.