Human ubiquitin-specific protease 7 (USP7) is a deubiquitinating enzyme that prevents protein degradation by removing polyubiquitin chains from its substrates. It regulates the stability of a number of human transcription factors and tumor suppressors and plays a critical role in the development of several types of cancer, including prostate and small cell lung cancer. In addition, human USP7 is targeted by several viruses of the Herpesviridae family and is required for effective herpesvirus infection. The USP7 C-terminal region (C-USP7) contains five ubiquitin-like domains (UBL1-5) that interact with several USP7 substrates. Although structures of the USP7 C terminus bound to its substrates could provide vital information for understanding USP7 substrate specificity, no such data has been available to date. In this work we have demonstrated that the USP7 ubiquitin-like domains can be studied in isolation by solution NMR spectroscopy, and we have determined the structure of the UBL1 domain. Furthermore, we have employed NMR and viral plaque assays to probe the interaction between the C-USP7 and HSV-1 immediate-early protein ICP0 (infected cell protein 0), which is essential for efficient lytic infection and virus reactivation from latency. We have shown that depletion of the USP7 in HFF-1 cells negatively affects the efficiency of HSV-1 lytic infection. We have also found that USP7 directly binds ICP0 via its C-terminal UBL1-2 domains and mapped the USP7-binding site for ICP0. Therefore, this study represents a first step toward understanding the molecular mechanism of C-USP7 specificity toward its substrates and may provide the basis for future development of novel antiviral and anticancer therapies.