Ubiquitin-like (UBL)-ubiquitin-associated (UBA) proteins such as Rad23 and Dsk2 mediate the delivery of polyubiquitinated proteins to the proteasome in the ubiquitin-proteasome pathway. We show here that budding yeast peptidyl-tRNA hydrolase 2 (Pth2), which was previously recognized as a peptidyl-tRNA hydrolase, is a UBL domain-binding protein that participates in the ubiquitin-proteasome pathway. Pth2 bound to the UBL domain of both Rad23 and Dsk2. Pth2 also interacted with polyubiquitinated proteins through the UBA domains of Rad23 and Dsk2. Pth2 overexpression caused an accumulation of polyubiquitinated proteins and inhibited the growth of yeast. Ubiquitin-dependent degradation was accelerated in the pth2Delta mutant and was retarded by overexpression of Pth2. Pth2 inhibited the interaction of Rad23 and Dsk2 with the polyubiquitin receptors Rpn1 and Rpn10 on the proteasome. Furthermore, Pth2 function involving UBL-UBA proteins was independent of its peptidyl-tRNA hydrolase activity. These results suggest that Pth2 negatively regulates the UBL-UBA protein-mediated shuttling pathway in the ubiquitin-proteasome system.