The E3 ubiquitin ligases CHIP/CHN-1 and UFD-2 team up to accelerate ubiquitin chain formation. However, it remained largely unclear how the high processivity of this E3 set is achieved. Here we studied the molecular mechanism and function of the CHN-1/UFD-2 complex in Caenorhabditis elegans. Our data show that UFD-2 binding promotes the cooperation between CHN-1 and ubiquitin-conjugating E2 enzymes by stabilizing CHN-1 U-box dimer. The HSP-1 chaperone outcompetes UFD-2 for CHN-1 binding and promotes the auto-inhibited CHN-1 state by acting on the conserved position of the U-box domain. The interaction with UFD-2 enables CHN-1 to efficiently ubiquitinate S-Adenosylhomocysteinase (AHCY-1), an enzyme crucial for lipid metabolism. Our results define the molecular mechanism underlying the synergistic cooperation of CHN-1 and UFD-2 in substrate ubiquitylation.