The process of dosage compensation (DC) in Drosophila counterbalances the monosomy of the X chromosome in male flies by increasing the transcription from this unique chromosome in the two-fold range. Upon exclusive expression of male-specific lethal 2 (MSL2) in males, the dosage compensation machinery assembles on active X-chromosomal genes. Overexpression of MSL proteins leads to aberrant binding of complex components to autosomes. Accordingly, MSL levels have to be carefully regulated. Here we describe a new mechanism through which MSL2 can fulfill its role as the central regulator of the faithful biogenesis and functionality of the DC machinery. MSL2 is an E3 ligase that ubiquitylates itself and the other associated components when their stoichiometry is unbalanced, uncovering proteasome-dependent degradation as an additional layer of homeostatic control of MSL levels. Furthermore, systematic mapping of modification sites by mass spectrometry and chromatin interaction studies on the target protein MSL1 suggest that the role of MSL2-mediated ubiquitylation goes beyond proteolysis.