Posttranslational modification by SUMO elicits a repressive effect on many transcription factors. In principle, sumoylation may either influence transcription factor activity on promoters, or it may act indirectly by targeting the modified factors to specific cellular compartments. To provide direct experimental evidence for the above, not necessarily mutually exclusive models, we analyzed the role of SUMO modification on the localization and the activity of the orphan nuclear receptor LRH-1. We demonstrate, by using fluorescence resonance energy transfer (FRET) and fluorescence recovery after photobleaching (FRAP) assays, that sumoylated LRH-1 is exclusively localized in promyelocytic leukemia protein (PML) nuclear bodies and that this association is a dynamic process. Release of LRH-1 from nuclear bodies correlated with its desumoylation, pointing to the pivotal role of SUMO conjugation in keeping LRH-1 in these locations. SUMO-dependent shuttling of LRH-1 into PML bodies defines two spatially separated pools of the protein, of which only the soluble, unmodified one is associated with actively transcribed target genes. The results suggest that SUMO-PML nuclear bodies may primarily function as dynamic molecular reservoirs, controlling the availability of certain transcription factors to active chromatin domains.