Histone deubiquitinating component of the transcription regulatory histone acetylation (HAT) complex SAGA. Catalyzes the deubiquitination of histone H2B, thereby acting as a coactivator in a large subset of genes. Required to counteract heterochromatin silencing. Controls the development of neuronal connectivity in visual system by being required for accurate axon targeting in the optic lobe. Required for expression of ecdysone-induced genes such as br/broad. Thiol-dependent hydrolysis of ester, thioester, amide, peptide and isopeptide bonds formed by the C-terminal Gly of ubiquitin (a 76-residue protein attached to proteins as an intracellular targeting signal). Component of the SAGA transcription coactivator-HAT complex, at least composed of Ada2b, not/nonstop, Pcaf/Gcn5, Sgf11 and Spt3. Expressed in the optic lobe and central brain. Highly expressed in the lamina precursor cells but not in differentiated lamina neurons. Also expressed in marginal, epithelial and medulla glial cells adjacent to the lamina plexus. Defects in the number and migration of glial cells located within the lamina plexus of the developing eye; the lack of glial cells causing mistargeting of the R1-R6 axons in the optic lobe. Lamina neuron development is normal. Belongs to the peptidase C19 family. UBP8 subfamily. Extended N-terminus.