Specifically deubiquitinates 'Lys-120' of histone H2A (H2AK119Ub), a specific tag for epigenetic transcriptional repression, thereby acting as a coactivator. Deubiquitination of histone H2A is a prerequisite for subsequent phosphorylation at 'Ser-11' of histone H3 (H3S10ph), and is required for chromosome segregation when cells enter into mitosis. In resting B- and T-lymphocytes, phosphorylation by AURKB leads to enhance its activity, thereby maintaining transcription in resting lymphocytes. Regulates Hox gene expression via histone H2A deubiquitination. Prefers nucleosomal substrates. Does not deubiquitinate histone H2B. 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). Homotetramer. Present in all the tissues examined including fetal brain, lung, liver, kidney, and adult heart, brain, placenta, lung, liver, skeletal muscle, kidney and pancreas. The UBP-type zinc finger binds 3 zinc ions that form a pair of cross-braced ring fingers encapsulated within a third zinc finger in the primary structure. It recognizes the C-terminal tail of free ubiquitin. Phosphorylated at the onset of mitosis and dephosphorylated during the metaphase/anaphase transition. Phosphorylation by AURKB enhances the deubiquitinase activity. A chromosomal aberration involving USP16 is a cause of Chronic myelomonocytic leukemia. Inversion inv(21) (q21;q22) with RUNX1/AML1. USP16 may contribute to somatic stem cell defects observed in Down syndrome. USP16 is triplicated in Down syndrome and its overexpression may contribute to proliferation defects in stem cells. Reduction of USP16 levels results in increased proliferation capacity of Down syndrome fibroblasts (PubMed:24025767). Belongs to the peptidase C19 family. USP16 subfamily.