The accumulation of misfolded proteins is associated with multiple neurodegenerative disorders, but it remains poorly defined how this accumulation causes cytotoxicity. Here, we demonstrate that the Cdc48/p97 segregase machinery drives the clearance of ubiquitinated model misfolded protein Huntingtin (Htt103QP) and limits its aggregation. Nuclear ubiquitin ligase San1 acts upstream of Cdc48 to ubiquitinate Htt103QP. Unexpectedly, deletion of SAN1 and/or its cytosolic counterpart UBR1 rescues the toxicity associated with Cdc48 deficiency, suggesting that ubiquitin depletion, rather than compromised proteolysis of misfolded proteins, causes the growth defect in cells with Cdc48 deficiency. Indeed, Cdc48 deficiency leads to elevated protein ubiquitination levels and decreased free ubiquitin, which depends on San1/Ubr1. Furthermore, enhancing free ubiquitin levels rescues the toxicity in various Cdc48 pathway mutants and restores normal turnover of a known Cdc48-independent substrate. Our work highlights a previously unappreciated function for Cdc48 in ensuring the regeneration of monoubiquitin that is critical for normal cellular function. Display omitted •Cdc48 segregase is required for the degradation of misfolded proteins in yeast•Cdc48 deficiency leads to a decreased pool of free ubiquitin that compromises the UPS•San1 and Ubr1 ubiquitinate misfolded proteins, reducing the free ubiquitin pool•Restoring free ubiquitin suppresses the toxicity associated with Cdc48 deficiency Misfolded protein accumulation causes cytotoxicity, but the mechanism remains poorly understood. Using budding yeast as a model organism, Higgins et al. show that ubiquitination of misfolded proteins depletes free ubiquitin, which compromises ubiquitin-dependent cellular functions and causes cytotoxicity. The Cdc48/p97 segregase antagonizes this cytotoxicity by promoting ubiquitin recycling from misfolded proteins.