The selective degradation of many short-lived proteins in eukaryotic cells is carried out by the ubiquitin system. In this pathway, proteins are targeted for degradation by covalent ligation to ubiquitin, a highly conserved small protein. Ubiquitin-mediated degradation of regulatory proteins plays important roles in the control of numerous processes, including cell-cycle progression, signal transduction, transcriptional regulation, receptor down-regulation, and endocytosis. The ubiquitin system has been implicated in the immune response, development, and programmed cell death. Abnormalities in ubiquitin-mediated processes have been shown to cause pathological conditions, including malignant transformation. In this review we discuss recent information on functions and mechanisms of the ubiquitin system. Since the selectivity of protein degradation is determined mainly at the stage of ligation to ubiquitin, special attention is focused on what we know, and would like to know, about the mode of action of ubiquitin-protein ligation systems and about signals in proteins recognized by these systems.