Maintaining genomic integrity during DNA replication is essential for cellular survival and for preventing tumorigenesis. Proliferating cell nuclear antigen (PCNA) functions as a processivity factor for DNA replication, and posttranslational modification of PCNA plays a key role in coordinating DNA repair against replication-blocking lesions by providing a platform to recruit factors required for DNA repair and cell cycle control. Here, we identify human SDE2 as a new genome surveillance factor regulated by PCNA interaction. SDE2 contains an N-terminal ubiquitin-like (UBL) fold, which is cleaved at a diglycine motif via a PCNA-interacting peptide (PIP) box and deubiquitinating enzyme activity. The cleaved SDE2 is required for negatively regulating ultraviolet damage-inducible PCNA monoubiquitination and counteracting replication stress. The cleaved SDE2 products need to be degraded by the CRL4CDT2 ubiquitin E3 ligase in a cell cycle- and DNA damage-dependent manner, and failure to degrade SDE2 impairs S phase progression and cellular survival. Collectively, this study uncovers a new role for CRL4CDT2 in protecting genomic integrity against replication stress via regulated proteolysis of PCNA-associated SDE2 and provides insights into how an integrated UBL domain within linear polypeptide sequence controls protein stability and function.