Deubiquitinating enzymes regulate essential cellular processes, and their dysregulation is implicated in multiple disease states. Ubiquitin carboxy-terminal hydrolase L1 (UCH-L1) has garnered attention for its links with Parkinson's disease and cancer; however, the mechanism of action of this enzyme in cells remains poorly understood. In order to advance our understanding of UCH-L1 function, we have been developing small molecule modulators of the enzyme for use as tools to probe its role in cells. In support of these efforts, an investigation of the mechanism of UCH-L1 catalysis was previously reported. Here, we extend this mechanistic evaluation and examine substrate recognition by UCH-L1. We developed a panel of ubiquitin fusions to test the contribution of specific residues of ubiquitin to binding and catalysis by the enzyme, and determined the activation parameters of selected variants to gain additional mechanistic insight. Ubiquitin side chains critical for establishing the Michaelis complex and enabling catalysis were identified, and features of this complex that differ between UCH-L1 and a homologue, UCH-L3, were revealed. These data provide dramatic examples of differences in substrate specificity between these enzymes. The implications of our experiments with UCH-L1 for selective inhibitor design and the relationship to disease are discussed.