The deubiquitylase OTUD3 plays a suppressive role in breast tumorigenesis through stabilizing PTEN protein, but its role in lung cancer remains unclear. Here, we demonstrate that in vivo deletion of OTUD3 indeed promotes breast cancer development in mice, but by contrast, it slows down KrasG12D-driven lung adenocarcinoma (ADC) initiation and progression and markedly increases survival in mice. Moreover, OTUD3 is highly expressed in human lung cancer tissues and its higher expression correlates with poorer survival of patients. Further mechanistic studies reveal that OTUD3 interacts with, deubiquitylates and stabilizes the glucose-regulated protein GRP78. Knockdown of OTUD3 results in a decrease in the level of GRP78 protein, suppression of cell growth and migration, and tumorigenesis in lung cancer. Collectively, our results reveal a previously unappreciated pro-oncogenic role of OTUD3 in lung cancer and indicate that deubiquitylases could elicit tumor-suppressing or tumor-promoting activities in a cell- and tissue-dependent context.