The severe acute respiratory syndrome coronavirus papain-like protease (SARS-CoV PLpro) carries out N-terminal processing of the viral replicase polyprotein, and also exhibits Lys48-linked polyubiquitin chain debranching and ISG15 precursor processing activities in vitro. Here, we used SDS-PAGE and fluorescence-based assays to demonstrate that ISG15 derivatives are the preferred substrates for the deubiquitinating activity of the PLpro. With k(cat)/K(M) of 602,000 M(-1)s(-1), PLpro hydrolyzes ISG15-AMC 30- and 60-fold more efficiently than Ub-AMC and Nedd8-AMC, respectively. Data obtained with truncated ISG15 and hybrid Ub/ISG15 substrates indicate that both the N- and C-terminal Ub-like domains of ISG15 contribute to this preference. The enzyme also displays a preference for debranching Lys48- over Lys63-linked polyubiquitin chains. Our results demonstrate that SARS-CoV PLpro can differentiate between ubiquitin-like modifiers sharing a common C-terminal sequence, and that the debranching activity of the PLpro is linkage type selective. The potential structural basis for the demonstrated specificity of SARS-CoV PLpro is discussed.