Specifically deubiquitinates 'Lys-120' of histone H2A (H2AK119Ub), a specific tag for epigenetic transcriptional repression, thereby acting as a coactivator. Deubiquitination of histone H2A is a prerequisite for subsequent phosphorylation at 'Ser-11' of histone H3 (H3S10ph), and is required for chromosome segregation when cells enter into mitosis. In resting B- and T-lymphocytes, phosphorylation by AURKB leads to enhance its activity, thereby maintaining transcription in resting lymphocytes. Regulates Hox gene expression via histone H2A deubiquitination. Prefers nucleosomal substrates. Does not deubiquitinate histone H2B.