Protein ubiquitination is a reversible process catalyzed by ubiquitin ligases and ubiquitin-specific proteases (UBPs). We report the identification and characterization of UBP16 in Arabidopsis thaliana. UBP16 is a functional ubiquitin-specific protease and its enzyme activity is required for salt tolerance. Plants lacking UBP16 were hypersensitive to salt stress and accumulated more sodium and less potassium. UBP16 positively regulated plasma membrane Na(+)/H(+) antiport activity. Through yeast two-hybrid screening, we identified a putative target of UBP16, SERINE HYDROXYMETHYLTRANSFERASE1 (SHM1), which has previously been reported to be involved in photorespiration and salt tolerance in Arabidopsis. We found that SHM1 is degraded in a 26S proteasome-dependent process, and UBP16 stabilizes SHM1 by removing the conjugated ubiquitin. Ser hydroxymethyltransferase activity is lower in the ubp16 mutant than in the wild type but higher than in the shm1 mutant. During salt stress, UBP16 and SHM1 function in preventing cell death and reducing reactive oxygen species accumulation, activities that are correlated with increasing Na(+)/H(+) antiport activity. Overexpression of SHM1 in the ubp16 mutant partially rescues its salt-sensitive phenotype. Taken together, our results suggest that UBP16 is involved in salt tolerance in Arabidopsis by modulating sodium transport activity and repressing cell death at least partially through modulating SMH1stability and activity.