Sumoylation is generally considered a repressive mark for many transcription factors. However, the in vivo importance of sumoylation for any given substrate remains unclear and is questionable because the extent of sumoylation appears exceedingly low for most substrates. Here, we permanently eliminated SF-1/NR5A1 sumoylation in mice (Sf-1(K119R, K194R, or 2KR)) and found that Sf-1(2KR/2KR) mice failed to phenocopy a simple gain of SF-1 function or show elevated levels of well-established SF-1 target genes. Instead, mutant mice exhibited marked endocrine abnormalities and changes in cell fate that reflected an inappropriate activation of hedgehog signaling and other potential SUMO-sensitive targets. Furthermore, unsumoylatable SF-1 mutants activated Shh and exhibited preferential recruitment to Shh genomic elements in cells. We conclude that the sumoylation cycle greatly expands the functional capacity of transcription factors such as SF-1 and is leveraged during development to achieve cell-type-specific gene expression in multicellular organisms.