Previous studies have indicated that the ATP-requiring conjugation of ubiquitin with proteins plays a role in the energy-dependent degradation of intracellular proteins. To examine whether such conjugates are indeed intermediates in protein breakdown, conjugates of 125I-labeled lysozyme with ubiquitin were isolated and incubated with a fraction of reticulocyte extract that lacks the enzymes that carry out ubiquitin-protein conjugation. ATP markedly stimulated degradation of the lysozyme moiety of ubiquitin conjugates to products soluble in trichloroacetic acid. By contrast, free 125I-labeled lysozyme was not degraded under these conditions, unless ubiquitin and the three enzymes required for ubiquitin conjugation were supplemented. Mg2+ was absolutely required for conjugate breakdown. Of various nucleotides, only CTP replaced ATP. Nonhydrolyzable analogs of ATP were not effective. In the absence of ATP, free lysozyme is released from ubiquitin-lysozyme conjugates by isopeptidases present in the extract. Thus, ATP is involved in both the formation and the breakdown of ubiquitin-protein conjugates.