Monoubiquitination of histone H2B (H2B-Ub) plays a role in transcription and DNA replication, and is required for normal localization of the histone chaperone, FACT. In yeast, H2B-Ub is deubiquitinated by Ubp8, a subunit of SAGA, and Ubp10. Although they target the same substrate, loss of Ubp8 and Ubp10 causes different phenotypes and alters the transcription of different genes. We show that Ubp10 has poor activity on yeast nucleosomes, but that addition of FACT stimulates Ubp10 activity on nucleosomes and not on other substrates. Consistent with a role for FACT in deubiquitinating H2B in vivo, a FACT mutant strain shows elevated levels of H2B-Ub. Combination of FACT mutants with deletion of Ubp10, but not Ubp8, confers increased sensitivity to hydroxyurea and activates a cryptic transcription reporter, suggesting that FACT and Ubp10 may coordinate nucleosome assembly during DNA replication and transcription. Our findings reveal unexpected interplay between H2B deubiquitination and nucleosome dynamics.