The covalent modification of proteins by the small ubiquitin-like protein SUMO has been implicated in the regulation of numerous biological processes, including nucleocytoplasmic transport, genomic stability, and gene transcription. Sumoylation occurs by a multienzyme process similar to ubiquitination and, in Saccharomyces cerevisiae, is reversed by desumoylating enzymes encoded by the Ulp1 and Smt4/Ulp2 genes. The physiological importance of desumoylation has been revealed by mutations in either gene, which lead to nonoverlapping defects in cell cycle transition and meiosis. Several mammalian Ulp homologues have been identified, but, to date, nothing is known of the phenotypic effects of their loss of function. Here, we describe a random retroviral insertional mutation of one homolog, mouse SENP1/SuPr-2. The mutation causes increased steady-state levels of the sumoylated forms of a number of proteins and results in placental abnormalities incompatible with embryonic development. Our findings provide the first insight into the critical importance of regulating sumoylation in mammals.