In eukaryotic cells, many short-lived proteins are conjugated with Lys 48-linked ubiquitin chains and degraded by the proteasome. Ubiquitination requires an activating enzyme (E1), a conjugating enzyme (E2) and a ligase (E3). Most ubiquitin ligases use either a HECT (homologous to E6-associated protein C terminus) or a RING (really interesting new gene) domain to catalyse polyubiquitination, but the mechanism of E3 catalysis is poorly defined. Here we dissect this process using mouse Ube2g2 (E2; identical at the amino acid level to human Ube2g2) and human gp78 (E3), an endoplasmic reticulum (ER)-associated conjugating system essential for the degradation of misfolded ER proteins. We demonstrate by expressing recombinant proteins in Escherichia coli that Ube2g2/gp78-mediated polyubiquitination involves preassembly of Lys 48-linked ubiquitin chains at the catalytic cysteine of Ube2g2. The growth of Ube2g2-anchored ubiquitin chains seems to be mediated by an aminolysis-based transfer reaction between two Ube2g2 molecules that each carries a ubiquitin moiety in its active site. Intriguingly, polyubiquitination of a substrate can be achieved by transferring preassembled ubiquitin chains from Ube2g2 to a lysine residue in a substrate.