OTULIN specifically hydrolyzes methionine1 (Met1)-linked ubiquitin chains conjugated by LUBAC (linear ubiquitin chain assembly complex). Using mass spectrometry, we discovered an interaction of OTULIN with SNX27 (sorting nexin 27), an adaptor of the endosomal retromer complex responsible for protein recycling to the cell surface. The C-terminal PDZ binding motif (PDZbm) in OTULIN associates with the cargo-binding site in the PDZ domain of SNX27. By solving the structure of the OTU domain in complex with the PDZ domain, we demonstrate that a second interface contributes to the selective, high affinity interaction of OTULIN and SNX27. SNX27 does not affect OTULIN catalytic activity, OTULIN-LUBAC binding or Met1-linked ubiquitin chain homeostasis. However, via association OTULIN antagonizes SNX27-dependent cargo loading, binding of SNX27 to the retromer subunit VPS26 and endosome-to-membrane trafficking. Thus, we define an additional, non-catalytic function of OTULIN in the regulation of retromer assembly and protein recycling to the cell surface.