NF-κB is the master regulator of the immune response and is responsible for the transcription of hundreds of genes controlling inflammation and immunity. Activation of NF-κB occurs in the cytoplasm through the kinase activity of the IκB kinase complex, which leads to translocation of NF-κB to the nucleus. Once in the nucleus, NF-κB transcriptional activity is regulated by DNA binding-dependent ubiquitin-mediated proteasomal degradation. We have identified the deubiquitinase Ubiquitin Specific Protease-7 (USP7) as a regulator of NF-κB transcriptional activity. USP7 deubiquitination of NF-κB leads to increased transcription. Loss of USP7 activity results in increased ubiquitination of NF-κB, leading to reduced promoter occupancy and reduced expression of target genes in response to Toll-like- and TNF-receptor activation. These findings reveal a unique mechanism controlling NF-κB activity and demonstrate that the deubiquitination of NF-κB by USP7 is critical for target gene transcription.