Cell proliferation and differentiation are governed by a finely controlled balance between repression and activation of gene expression. The vertebrate Ets transcriptional repressor Tel (ETV6) and its invertebrate orthologue Yan, play pivotal roles in cell fate determination although the precise mechanisms by which repression of gene expression by these factors is achieved are not clearly defined. Here, we report the identification and characterization of the primary site of sumoylation of Tel, lysine 11 (K11), which is highly conserved in vertebrates (except Danio rerio). We demonstrate that in cells PIAS3 binds to Tel and stimulates sumoylation of K11 in the nucleus. Both Tel monomers and oligomers are efficiently sumoylated on K11 in vitro; but in cells only Tel oligomers are found conjugated with SUMO, whereas sumoylation of Tel monomers is transitory and appears to sensitize them for proteasomal degradation. Mechanistically, sumoylation of K11 inhibits repression of gene expression by full-length Tel. In accordance with this observation, we found that sumoylation impedes Tel association with DNA. By contrast, a Tel isoform lacking K11 (TelM43) is strongly repressive. This isoform results from translation from an alternative initiation codon (M43) that is common to all Tel proteins that also contain the K11 sumoylation consensus site. We find that PIAS3 may have a dual, context-dependent influence on Tel; it mediates Tel sumoylation, but it also augments Tel's repressive function in a sumoylation-independent fashion. Our data support a model that suggests that PIAS-mediated sumoylation of K11 and the emergence of TelM43 in early vertebrates are linked and that this serves to refine spatiotemporal control of gene expression by Tel by establishing a pool of Tel molecules that are available either to be recycled to reinforce repression of gene expression or are degraded in a regulated fashion.