SUMOylation is a reversible process regulated by a family of sentrin/SUMO-specific proteases (SENPs). Of the six SENP family members, except for SENP1 and SENP2, the substrate specificities of the rest of SENPs are not well defined. Here, we have described SENP5, which has restricted substrate specificity. SENP5 showed SUMO-3 C-terminal hydrolase activity but could not process pro-SUMO-1 in vitro. Furthermore, SENP5 showed more limited isopeptidase activity in vitro. In vivo, SENP5 showed isopeptidase activity against SUMO-2 and SUMO-3 conjugates but not against SUMO-1 conjugates. Native SENP5 localized mainly to the nucleolus but was also found in the nucleus. The N terminus of SENP5 contains a stretch of amino acids responsible for the nucleolar localization of SENP5. N-terminal-truncated SENP5 co-localized with PML, a known SUMO substrate. Using PML SUMOylation mutants as model substrates, we showed that SENP5 can remove poly-SUMO-2 or poly-SUMO-3 from the Lys160 or Lys490 positions of PML. However, SENP5 could not remove SUMO-1 from the Lys160 or Lys490 positions of PML. Nonetheless, SENP5 could remove SUMO-1, -2, and -3 from the Lys65 position of PML. Thus, SENP5 also possesses limited SUMO-1 isopeptidase activity. We were also able to show that SENP3 has substrate specificity similar to that of SENP5. Thus, SENP3 and SENP5 constitute a subfamily of SENPs that regulate the formation of SUMO-2 or SUMO-3 conjugates and, to a less extent, SUMO-1 modification.