In eukaryotes, DNA is packaged by histone proteins to form nucleosomes - the fundamental unit of chromatin. Aside from their structural role in DNA compaction, histones are dynamic regulators of DNA accessibility and, hence, are important for DNA-templated processes including transcription and DNA repair. To regulate chromatin architecture, histones are covalently modified with numerous post-translational modifications (PTMs), e.g., methylation, acetylation, phosphorylation and monoubiquitylation. Histone PTMs function by either directly altering chromatin structure or serving as binding sites for effector proteins that mediate downstream functions. Because histone PTMs regulate many cellular processes, their specific deposition and removal throughout the genome are highly regulated. Accordingly, dysregulation of histone PTMs can result in human diseases such as cancer. One PTM that is carefully regulated and whose disruption results in disease is monoubiquitylation of lysine 123 on histone H2B (H2BK123ub1). The work in this dissertation focuses on understanding how H2BK123ub1 is regulated and functions with an emphasis on its role in transcription. These studies were performed using the highly tractable model organism Saccharomyces cerevisiae. Here, two novel forms of H2BK123ub1 regulation are identified. First, H2BK123ub1 was found to be regulated by a region of histone H2A in a form of trans-histone regulation. This finding led to identification of a second form of regulation, which couples H2BK123ub1 catalysis to the stability of the responsible modifying enzyme Bre1. Lastly the functional role of H2BK123ub1 in transcription is expanded by connecting Bre1 stability to the regulation of gene silencing and by the finding that a histone PTM downstream of H2BK123ub1 facilitates interactions between histones and the transcriptional machinery. Altogether, the work in this dissertation expands our knowledge of the role and regulation of H2BK123ub1. These findings will help guide future studies focusing on H2BK123ub1 in chromatin regulation and disease.