Cohesin is a protein complex that ties sister DNA molecules from the time of DNA replication until the metaphase to anaphase transition. Current models propose that the association of the Smc1, Smc3, and Scc1/Mcd1 subunits creates a ring-shaped structure that entraps the two sister DNAs. Cohesin is essential for correct chromosome segregation and recombinational repair. Its activity is therefore controlled by several posttranslational modifications, including acetylation, phosphorylation, sumoylation, and site-specific proteolysis. Here we show that cohesin sumoylation occurs at the time of cohesion establishment, after cohesin loading and ATP binding, and independently from Eco1-mediated cohesin acetylation. In order to test the functional relevance of cohesin sumoylation, we have developed a novel approach in budding yeast to deplete SUMO from all subunits in the cohesin complex, based on fusion of the Scc1 subunit to a SUMO peptidase Ulp domain (UD). Downregulation of cohesin sumoylation is lethal, and the Scc1-UD chimeras have a failure in sister chromatid cohesion. Strikingly, the unsumoylated cohesin rings are acetylated. Our findings indicate that SUMO is a novel molecular determinant for the establishment of sister chromatid cohesion, and we propose that SUMO is required for the entrapment of sister chromatids during the acetylation-mediated closure of the cohesin ring.