Expression of the ISG15 specific protease USP18 is highly induced by type I interferons. The two main functions of USP18, i.e. its enzymatic activity and down-regulation of type I interferon signaling, are well characterized. However, to date all functional studies focused on full-length USP18. Here, we report that translation of human USP18 is initiated by a rare start codon (CUG). Usage of this non-canonical initiation site with its weak translation initiation efficiency promotes expression of an N-terminal truncated isoform (USP18-sf). In addition, an internal ribosome entry site (IRES) located in the 5'-coding region of USP18 also contributes to translation of USP18-sf. Functionally, both isoforms exhibit enzymatic activity and interfere with type I interferon signaling. However, USP18-sf shows different subcellular distribution compared with the full-length protein and enhanced deISGylation activity in the nucleus. Taken together, we report the existence of an N-terminal truncated isoform of USP18, whose expression is controlled on translational level by two independent mechanisms providing translational flexibility as well as cell type-specific resistance to inhibition of cap-dependent translation.