Tissue homeostasis depends largely on the ability to replenish impaired or aged cells. Thus, tissue-resident stem cells need to provide functional progeny throughout the lifetime of an organism. Significant work in the past years has characterized how stem cells integrate signals from their environment to shape regulatory transcriptional networks and chromatin-regulating factors that control stem cell differentiation or maintenance. There is increasing interest in how post-translational modifications, and specifically ubiquitylation, control these crucial decisions. Ubiquitylation modulates the stability and function of important factors that regulate key processes in stem cell behavior. In this review, we analyze the role of ubiquitylation in embryonic stem cells and different adult multipotent stem cell systems and discuss the underlying mechanisms that control the balance between quiescence, self-renewal, and differentiation. We also discuss deregulated processes of ubiquitin-mediated protein degradation that lead to the development of tumor-initiating cells.