Mechanisms of USP18 DeISGylation Revealed by Comparative Analysis with Its Human Paralog USP41

The ubiquitin-like protein ISG15 (interferon-stimulated gene 15) regulates the host response to bacterial and viral infections through its conjugation to proteins (ISGylation) following interferon production. ISGylation is antagonized by the highly specific cysteine protease USP18, which is the major deISGylating enzyme. However, mechanisms underlying USP18's extraordinary specificity towards ISG15 remains elusive. Here, we show that USP18 interacts with its paralog USP41, whose catalytic domain shares 97% identity with USP18. However, USP41 does not act as a deISGylase, which led us to perform a comparative analysis to decipher the basis for this difference, revealing molecular determinants of USP18's specificity towards ISG15. We found that USP18 C-terminus, as well as a conserved Leucine at position 198, are essential for its enzymatic activity and likely act as functional surfaces based on AlphaFold predictions. Finally, we propose that USP41 antagonizes conjugation of the understudied ubiquitin-like protein FAT10 (HLA-F adjacent transcript 10) from substrates in a catalytic-independent manner. Altogether, our results offer new insights into USP18's specificity towards ISG15, while identifying USP41 as a negative regulator of FAT10 conjugation.