Erythroid Krüppel-like factor (EKLF [KLF1]) is a transcriptional regulator that plays a critical role within a specific subset of hematopoietic cells, particularly in the erythroid lineage and its immediate precursor, the megakaryocyte-erythroid progenitor (MEP). We find that EKLF is posttranslationally modified by sumoylation at a single site near its amino terminus and that PIAS1 plays a critical role in this process. Mutation of this site has little effect on EKLF's ability to function as a transcriptional activator; however, it has a dramatic effect on its repressive abilities. The mechanism of repression likely involves a novel small ubiquitin-related modifier (SUMO)-dependent EKLF interaction with the Mi-2beta component of the NuRD repression complex. Mutated EKLF is attenuated in its ability to repress megakaryocyte differentiation, implicating EKLF sumoylation status in differentiative decisions emanating from the MEP. These studies demonstrate a novel mechanism by which transcription factor sumoylation can alter protein-protein interactions and bipotential lineage decisions.