Timely stalling and resumption of RNA polymerases at damaged chromatin are actively regulated processes. Prior work showed an importance of FACT histone chaperone in such process. Here we provide a new role of OTUD5 deubiquitinase in the FACT-dependent process. Through a DUB RNAi screen, we found OTUD5 as a specific stabilizer of the UBR5 E3 ligase. OTUD5 localizes to DNA double strand breaks (DSBs), interacts with UBR5 and represses the RNA Pol II elongation and RNA synthesis. OTUD5 co-localizes and interacts with the FACT component SPT16 and antagonizes the histone H2A deposition at DSB lesions. OTUD5 interacts with UBR5 and SPT16 independently through two distinct regions, and both interactions are necessary for arresting the Pol II elongation at lesions. These analyses suggested that the catalytic (through UBR5 stabilization) as well as scaffolding (through FACT binding) activities of OTUD5 are involved in the FACT-dependent transcription. We found that a cancer-associated missense mutation within the OTUD5 Ubiquitin Interacting Motif (UIM) abrogates the FACT association and the Pol II arrest, providing a possible link between the transcriptional regulation and tumor suppression. Our work establishes OTUD5 as a new regulator of the DNA damage response, and provides an insight into the FACT-dependent transcription at damaged chromatin.