The E3 ubiquitin ligase Mule/ARF-BP1 plays an important role in the cellular DNA damage response by controlling base excision repair and p53 protein levels. However, how the activity of Mule is regulated in response to DNA damage is currently unknown. Here, we report that the Ser18-containing isoform of the USP7 deubiquitylation enzyme (USP7S) controls Mule stability by preventing its self-ubiquitylation and subsequent proteasomal degradation. We find that in response to DNA damage, downregulation of USP7S leads to self-ubiquitylation and proteasomal degradation of Mule, which eventually leads to p53 accumulation. Cells that are unable to downregulate Mule show reduced ability to upregulate p53 levels in response to DNA damage. We also find that, as Mule inactivation is required for stabilization of base excision repair enzymes, the failure of cells to downregulate Mule after DNA damage results in deficient DNA repair. Our data describe a novel mechanism by which Mule is regulated in response to DNA damage and coordinates cellular DNA damage responses and DNA repair.