BackgroundThe repressor element-1 silencing transcription factor (REST), a master transcriptional repressor, is essential for maintenance, self-renewal, and differentiation in neuroblastoma. An elevated expression of REST is associated with impaired neuronal differentiation, which results in aggressive neuroblastoma formation. E3 ligases are known to regulate REST protein abundance through the 26 S proteasomal degradation pathway in neuroblastoma. However, deubiquitinating enzymes (DUBs), which counteract the function of E3 ligase-mediated REST protein degradation and their impact on neuroblastoma tumorigenesis have remained unexplored.MethodsWe employed a CRISPR/Cas9 system to perform a genome-wide knockout of ubiquitin-specific proteases (USPs) and used western blot analysis to screen for DUBs that regulate REST protein abundance. The interaction between USP3 and REST was confirmed by immunoprecipitation and Duolink in situ proximity assays. The deubiquitinating effect of USP3 on REST protein degradation, half-life, and neuronal differentiation was validated by immunoprecipitation, in vitro deubiquitination, protein-turnover, and immunostaining assays. The correlation between USP3 and REST expression was assessed using patient neuroblastoma datasets. The USP3 gene knockout in neuroblastoma cells was performed using CRISPR/Cas9, and the clinical relevance of USP3 regulating REST-mediated neuroblastoma tumorigenesis was confirmed by in vitro and in vivo oncogenic experiments.ResultsWe identified a deubiquitinase USP3 that interacts with, stabilizes, and increases the half-life of REST protein by counteracting its ubiquitination in neuroblastoma. Anin silicoanalysis showed a correlation between USP3 and REST in multiple neuroblastoma cell lines and identified USP3 as a prognostic marker for overall survival in neuroblastoma patients. Silencing of USP3 led to a decreased self-renewal capacity and promoted retinoic acid-induced differentiation in neuroblastoma. A loss of USP3 led to attenuation of REST-mediated neuroblastoma tumorigenesis in a mouse xenograft model.ConclusionThe findings of this study indicate that USP3 is a critical factor that blocks neuronal differentiation, which can lead to neuroblastoma. We envision that targeting USP3 in neuroblastoma tumors might provide an effective therapeutic differentiation strategy for improved survival rates of neuroblastoma patients.Supplementary InformationThe online version contains supplementary material available at 10.1186/s13046-023-02694-1.