Protein ubiquitylation is a dynamic post-translational modification that can be reversed by deubiquitylating enzymes (DUBs). It is unclear how the small number of ∼100 DUBs present in mammalian cells regulates the thousands of different ubiquitylation events. Here we analysed annotated transcripts of human DUBs and find ∼300 ribosome-associated transcripts annotated as protein coding, which thus increase the total number of DUBs. Using USP35, a poorly studied DUB, as a case study we provide evidence that alternative isoforms contribute to the functional expansion of DUBs. We show the existence of two different USP35 isoforms that localise to different intracellular compartments and have distinct functions. Our results reveal that isoform 1 is an anti-apoptotic factor that inhibits staurosporine- and TNF-related apoptosis inducing ligand (TRAIL)-induced apoptosis. In contrast, USP35 isoform 2 is an integral membrane protein of the endoplasmic reticulum (ER) present also at lipid droplets. Manipulations of isoform 2 levels cause rapid ER stress likely through deregulation of lipid homeostasis and lead to cell death. Our work highlights how alternative isoforms provide functional expansion of DUBs and sets directions for future research.