Ubiquitin C-terminal hydrolase 3 (UCHL3) is a cysteine protease that plays a crucial role in cell cycle regulation, DNA repair, and apoptosis by carrying out deubiquitination and deneddylation activities. It has emerged as a promising therapeutic target for certain cancers due to its ability to stabilize oncoproteins. The dysregulation of UCHL3 also has been associated with neurodegenerative diseases, underscoring its significance in maintaining protein homeostasis within cells. Research on UCHL3, including studies on Uchl3 knockout mice, has revealed its involvement in learning deficits, cellular stress responses, and retinal degeneration. This review delves into the cellular processes controlled by UCHL3 and its role in health and disease progression, as well as the development of UCHL3 inhibitors. Further investigation into the molecular mechanisms and physiological functions of UCHL3 is crucial for a comprehensive understanding of its impact on health and disease.