Hydrolase that deubiquitinates polyubiquitinated target proteins including imd (PubMed:19837371, PubMed:19039105). Required for preventing the constitutive activation of the imd/NF-kappa-B (Imd) signaling cascade under unchalleneged conditions (PubMed:19837371, PubMed:25027767). Deubiquitinates imd linked 'Lys-63' chains which leads its proteasomal degradation and consequently down-regulation of the Imd signaling cascade (PubMed:19837371). Removal of the activating 'Lys-63'-linked chains is likely to enable their replacement with 'Lys-48'-linked chains which act as 'tags' the for proteosomal degradation of imd (PubMed:19837371). Required for maintaining multiple types of adult stem cells, including male and female germline, epithelial follicle cell and intestinal stem cells (PubMed:19039105). May function as a transcriptional repressor by continually deubiquiting histone H2B at the promoters of genes critical for cellular differentiation, thereby preventing histone H3 'Lys-4' trimethylation (H3K4me3) (PubMed:19039105). Controls selective autophagy activation by ubiquitinated proteins (PubMed:22622177). 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). Interacts with atms/PAF1, but not with CycT (PubMed:19039105). Interacts (via C-terminus) with imd (via N-terminus) (PubMed:19837371). Mutants are lethal at larval stages (PubMed:19837371, PubMed:22622177). They are significantly smaller without gross morphological defects and die 5 days after egg laying (PubMed:22622177). Cells show accumulation of ubiquitinated proteins in both the nucleus and the cytoplasm, forming dense dots (PubMed:22622177). Double mutants for ref(2)P and scny die 96 hours after egg laying (PubMed:22622177). RNAi-mediated knockdown is also larval lethal (PubMed:19837371). RNAi-mediated knockdown in the fat body or gut of uninfected adults, results in a significant increase in the expression of the antimicrobial peptide genes Dpt, AttA and puc (PubMed:19837371). Adults raised under axenic conditions do not display any increase in Dpt, AttA and puc expression (PubMed:19837371). No significant increase in the expression of the antifungal peptide gene Drs (PubMed:19837371). Double knockdown with imd in the adult fat body, prevents the enhanced expression of Dpt in uninfected flies (PubMed:19837371). Belongs to the peptidase C19 family.