Monoubiquitination of histone H2B at lysine 120 plays a vital role in active transcription and DNA damage response pathways. Ubiquitin protein ligase E3 component N‐recognin 7 (UBR7) has been recently identified as an H2BK120 monoubiquitin ligase. However, the molecular details of its ubiquitin transfer mechanism are not well understood. Here, we report that the plant homeodomain (PHD) finger of UBR7 is essential for its association with E2 UbcH6 and consequent ubiquitin transfer to its substrate histone H2B. We also identified the critical region of UbcH6 involved in this function and shown that the residues stretching from 114 to 125 of histone H2B C‐terminal tail are sufficient for UBR7/UbcH6‐mediated ubiquitin transfer. We also employed antibody‐independent mass spectrometry to confirm UBR7‐mediated ubiquitination of the H2B C‐terminal tail. We demonstrated that the PHD finger of UBR7 forms a dimer and this dimerization is essential for ubiquitination of histone H2B. We mapped the critical residues involved in the dimerization and mutation of these residues that abrogate E3 ligase activity and are associated with cancer. Furthermore, we compared the mode of ubiquitin discharge from UbcH6 mediated by UBR7 and RING finger protein 20 (RNF20) through a thioester hydrolysis assay. Interestingly, binding of substrate H2B to UBR7 induces a conformational change in the PHD finger, which triggers ubiquitin transfer from UbcH6. However, the RNF20 RING finger alone is sufficient to promote the release of ubiquitin from UbcH6. Overall, the mechanism of ubiquitin transfer by the newly identified E3 ubiquitin ligase UBR7 is markedly different from that of RNF20.