Uhrf1-dependent histone H3 ubiquitylation plays a crucial role in the maintenance of DNA methylation via the recruitment of the DNA methyltransferase Dnmt1 to DNA methylation sites. However, the involvement of deubiquitylating enzymes (DUBs) targeting ubiquitylated histone H3 in the maintenance of DNA methylation is largely unknown. With the use of Xenopus egg extracts, we demonstrate here that Usp7, a ubiquitin carboxyl-terminal hydrolase, forms a stable complex with Dnmt1 and is recruited to DNA methylation sites during DNA replication. Usp7 deubiquitylates ubiquitylated histone H3 in vitro. Inhibition of Usp7 activity or its depletion in egg extracts results in enhanced and extended binding of Dnmt1 to chromatin, suppressing DNA methylation. Depletion of Usp7 in HeLa cells causes enhanced histone H3 ubiquitylation and enlargement of Dnmt1 nuclear foci during DNA replication. Our results thus suggest that Usp7 is a key factor that regulates maintenance of DNA methylation.