DNA polymerase eta is a Y family polymerase involved in translesion synthesis (TLS). Its action is initiated by simultaneous interaction between the PIP box in pol eta and PCNA and between the UBZ in pol eta and monoubiquitin attached to PCNA. Whereas monoubiquitination of PCNA is required for its interaction with pol eta during TLS, we now show that monoubiquitination of pol eta inhibits this interaction, preventing its functions in undamaged cells. Identification of monoubiquitination sites within pol eta nuclear localization signal (NLS) led to the discovery that pol eta NLS directly contacts PCNA, forming an extended pol eta-PCNA interaction surface. We name this the PCNA-interacting region (PIR) and show that its monoubiquitination is downregulated by various DNA-damaging agents. We propose that this mechanism ensures optimal availability of nonubiquitinated, TLS-competent pol eta after DNA damage. Our work shows how monoubiquitination can either positively or negatively regulate the assembly of a protein complex, depending on which substrates are targeted by ubiquitin.