Structural Maintenance of Chromosomes (SMC) family proteins participate in multisubunit complexes that govern chromosome structure and dynamics. SMC-containing condensin complexes create chromosome topologies essential for mitosis/meiosis, gene expression, recombination, and repair. Many eukaryotes have two condensin complexes (I and II); C. elegans has three (I, II, and the X-chromosome specialized condensin IDC) and their regulation is poorly understood. Here we identify a novel SMC-like protein, SMCL-1, that binds to C. elegans condensin SMC subunits, and modulates condensin functions. Consistent with a possible role as a negative regulator, loss of SMCL-1 partially rescued the lethal and sterile phenotypes of a hypomorphic condensin mutant, while over-expression of SMCL-1 caused lethality, chromosome mis-segregation, and disruption of condensin IDC localization on X chromosomes. Unlike canonical SMC proteins, SMCL-1 lacks hinge and coil domains, and its ATPase domain lacks conserved amino acids required for ATP hydrolysis, leading to the speculation that it may inhibit condensin ATPase activity. SMCL-1 homologs are apparent only in the subset of Caenorhabditis species in which the condensin I and II subunit SMC-4 duplicated to create the condensin IDC- specific subunit DPY-27, suggesting that SMCL-1 helps this lineage cope with the regulatory challenges imposed by evolution of a third condensin complex. Our findings uncover a new regulator of condensins and highlight how the duplication and divergence of SMC complex components in various lineages has created new proteins with diverse functions in chromosome dynamics.