SUMMARY The 26S proteasome is the major ATP-dependent protease in eukaryotic cells, where it catalyzes the degradation of thousands of proteins for general homeostasis and the control of vital processes. It specifically recognizes appropriate substrates through attached ubiquitin chains and uses its ATPase motor for mechanical unfolding and translocation into a proteolytic chamber. Here, we used single-molecule Förster Resonance Energy Transfer (FRET) measurements to provide unprecedented insights into the mechanisms of selective substrate engagement, ATP-dependent degradation, and the regulation of these processes by ubiquitin chains. Our assays revealed the proteasome conformational dynamics and allowed monitoring individual substrates as they progress through the central channel during degradation. We found that rapid transitions between engagement- and processing-competent conformations of the proteasome control substrate access to the ATPase motor. Ubiquitin-chain binding functions as an allosteric regulator to slow these transitions, stabilize the engagement-competent state, and facilitate degradation initiation. The global conformational transitions cease upon substrate engagement, and except for apparent motor slips when encountering stably folded domains, the proteasome remains in processing-competent states for substrate translocation and unfolding, which is further accelerated by ubiquitin chains. Our studies revealed the dependence of ATP-dependent substrate degradation on the conformational dynamics of the proteasome and its allosteric regulation by ubiquitin chains, which ensure substrate selectivity and prioritization in a crowded cellular environment.