Rad18 functions at the cross-roads of three different DNA damage response (DDR) pathways involved in protecting stressed replication forks: homologous recombination repair, DNA inter-strand cross-link repair and DNA damage tolerance. Although Rad18 serves to facilitate replication of damaged genomes by promoting translesion synthesis (TLS), this comes at a cost of potentially error-prone lesion bypass. In contrast, loss of Rad18-dependent TLS potentiates the collapse of stalled forks and leads to incomplete genome replication. Given the pivotal nature with which Rad18 governs the fine balance between replication fidelity and genome stability, Rad18 levels and activity have a major impact on genomic integrity. Here, we identify the de-ubiquitylating enzyme USP7 as a critical regulator of Rad18 protein levels. Loss of USP7 destabilizes Rad18 and compromises UV-induced PCNA mono-ubiquitylation and Pol η recruitment to stalled replication forks. USP7-depleted cells also fail to elongate nascent daughter strand DNA following UV irradiation and show reduced DNA damage tolerance. We demonstrate that USP7 associates with Rad18 directly via a consensus USP7-binding motif and can disassemble Rad18-dependent poly-ubiquitin chains both in vitro and in vivo. Taken together, these observations identify USP7 as a novel component of the cellular DDR involved in preserving the genome stability.