TRAF-binding domain (Trabid), one of deubiquitination enzymes, was recently reported to activate Wnt/ β-catenin signaling pathway. However, the role of Trabid in tumors including hepatocellular carcinoma (HCC) and the underlying mechanisms controlling its activity remain poorly understood. Here, we report that Trabid is significantly downregulated in HCC tumor samples and cell lines compared with normal controls and that its expression level is negatively correlated with HCC pathological grading, recurrence, and metastasis. The reintroduction of Trabid expression in tumor cells significantly decreases HCC progression as well as pulmonary metastasis. The effect of Trabid on HCC development occurs at least partially through regulation of Twist1 activity. Mechanistically, Trabid forms a complex with Twist1 and specifically cleaves RNF8-induced K63-linked poly-ubiquitin chains from Twist1, which enhances the association of Twist1 with β-TrCP1 and allows for subsequent K48-linked ubiquitination of Twist1. Knockdown of Trabid increases K63-linked ubiquitination, but abrogates K48-linked ubiquitination and degradation of Twist1, thus enhancing HCC growth and metastasis. Interestingly, Twist1 negatively regulates the promoter activity of Trabid, indicating that a double-negative feedback loop exists. Our findings also identify an essential role for activation of Trabid by AKT-mediated phosphorylation at Ser78/Thr117 in negatively regulating Twist1 signaling, which further provides insights into the mechanisms by which Trabid regulates Twist1 ubiquitination. Our results reveal that Trabid is a previously unrecognized inhibitor of HCC progression and metastasis, which sheds light on new strategies for HCC treatment.