Endosomal protein recycling is a fundamental cellular process important for cellular homeostasis, signaling, and fate determination that is implicated in several diseases. WASH is an actin-nucleating protein essential for this process, and its activity is controlled through K63-linked ubiquitination by the MAGE-L2-TRIM27 ubiquitin ligase. Here, we show that the USP7 deubiquitinating enzyme is an integral component of the MAGE-L2-TRIM27 ligase and is essential for WASH-mediated endosomal actin assembly and protein recycling. Mechanistically, USP7 acts as a molecular rheostat to precisely fine-tune endosomal F-actin levels by counteracting TRIM27 auto-ubiquitination/degradation and preventing overactivation of WASH through directly deubiquitinating it. Importantly, we identify de novo heterozygous loss-of-function mutations of USP7 in individuals with a neurodevelopmental disorder, featuring intellectual disability and autism spectrum disorder. These results provide unanticipated insights into endosomal trafficking, illuminate the cooperativity between an ubiquitin ligase and a deubiquitinating enzyme, and establish a role for USP7 in human neurodevelopmental disease.