The JAMM (JAB1/MPN/Mov34 metalloenzyme) motif has been proposed to provide the active site for isopeptidase activity associated with the Rpn11/POH1 subunit of the 19S-proteasome and the Csn5-subunit of the signalosome. We have looked for similar activity in associated molecule with the SH3 domain of STAM (AMSH), a JAMM domain-containing protein that associates with the SH3-domain of STAM, a protein, which regulates receptor sorting at the endosome. We demonstrate isopeptidase activity against K48-linked tetraubiquitin and K63-linked polyubiquitin chains to generate di-ubiquitin and free ubiquitin, respectively. An inactivating mutation (D348A) in AMSH leads to accumulation of ubiquitin on endosomes and the concomitant stabilization of a ubiquitinated form of STAM, which requires an intact ubiquitin interaction motif (UIM) within STAM. Short interfering RNA knockdown of AMSH enhances the degradation rate of EGF receptor (EGFR) following acute stimulation and ubiquitinated EGFR provides a substrate for AMSH in vitro. We propose that AMSH is a deubiquitinating enzyme with functions at the endosome, which oppose the ubiquitin-dependent sorting of receptors to lysosomes.