Abstract- The ubiquitin-specific protease 7 (USP7) has emerged as an attractive antitumor target due to its critical roles in several cancer signaling pathways as well as its essential role in maintaining Foxp3+ T-regulatory cell (Treg) functions. Pharmacological inhibition of USP7 is therefore expected to have both direct anti-tumor activity and activity in promoting anti-tumor immunity. Previously, we reported a series of selective USP7 inhibitors and demonstrated their anti-tumor activity through both direct anti-tumor and immunotherapy mechanisms. However, the precise mechanism of action of these compounds was not well defined. Using a combination of NMR spectroscopy, mass spectrometry, and single amino acid substitution approaches, in this study, we demonstrated that these inhibitors specifically target the catalytic cleft of USP7 and covalently modify its active site cysteine (Cys223) by forming a covalent adduct. Pharmacokinetic studies revealed sustained USP7 inhibition after short term inhibitor treatment and subsequent changes in the level and ubiquitylation of various pharmacodynamic markers, including the Treg lineage specific transcription factor Foxp3. Detailed knowledge of the mechanism of USP7 inhibition will allow rational design of improved inhibitors as the basis of a new class of anti-cancer therapeutics.