The RING E3 ubiquitin ligase UHRF1 controls DNA methylation through its ability to target the maintenance DNA methyltransferase DNMT1 to newly replicated chromatin. DNMT1 recruitment relies on ubiquitylation of histone H3 by UHRF1; however, how UHRF1 deposits ubiquitin onto the histone is unknown. Here, we demonstrate that the ubiquitin-like domain (UBL) of UHRF1 is essential for RING-mediated H3 ubiquitylation. Using chemical crosslinking and mass spectrometry, biochemical assays, and recombinant chromatin substrates, we show that the UBL participates in structural rearrangements of UHRF1 upon binding to chromatin and the E2 ubiquitin conjugating enzyme UbcH5a/UBE2D1. Similar to ubiquitin, the UBL exerts its effects through a hydrophobic patch that contacts a regulatory surface on the "backside'' of the E2 to stabilize the E2-E3-chromatin complex. Our analysis of the enzymatic mechanism of UHRF1 uncovers an unexpected function of the UBL domain and defines a new role for this domain in DNMT1-dependent inheritance of DNA methylation.