The Pup-proteasome system (PPS) is a prokaryotic post-translational protein degradation pathway, in which prokaryotic ubiquitin-like protein (Pup) is activated by deamidase of Pup (Dop) and covalently linked to target proteins by proteasome accessory factor A (Paf A), and then the Pup-labeled target proteins are degraded by proteasome. PPS in mycobacteria is involved in the reactions to a various stress conditions, such as oxidative stress, nutritional deficiency, heat stress, and DNA damage, and participates in the regulation of metal ion homeostasis, toxin-antitoxin system, and host immune resistance. It has been reported that PPS is closely related to the retention and pathogenicity of Mycobacterium tuberculosis, therefore the PPS components, PafA, Dop and proteasome, have emerged as new targets for anti-tuberculosis drug development. Several small molecule inhibitors targeting PPS have been identified as the potential novel anti-tuberculosis drugs. In addition, PafA-catalyzed protein pupylation has been applied in biotechnology research, and developed into a new proximity labeling method, named pupylation-based interaction tagging (PUP-IT), which has been successfully used in the study of protein-protein interactions. This article reviews the research progress in the mechanism of action and biological functions of PPS, as well as the research progress in PPS inhibitors and PPS biotechnology applications.