The OLE pathway of yeast regulates the level of the ER-bound enzyme Delta9-fatty acid desaturase OLE1, thereby controlling membrane fluidity. A central component of this regulon is the transcription factor SPT23, a homolog of mammalian NF-kappaB. SPT23 is synthesized as an inactive, ER membrane-anchored precursor that is activated by regulated ubiquitin/proteasome-dependent processing (RUP). We now show that SPT23 dimerizes prior to processing and that the processed molecule, p90, retains its ubiquitin modification and initially remains tethered to its unprocessed, membrane-bound SPT23 partner. Subsequently, p90 is liberated from its partner for nuclear targeting by the activity of the chaperone-like CDC48(UFD1/NPL4) complex. Remarkably, this enzyme binds preferentially ubiquitinated substrates, suggesting that CDC48(UFD1/NPL4) is qualified to selectively remove ubiquitin conjugates from protein complexes.