The membrane association of the tumour suppressor phosphatase and tensin homologue (PTEN) is required to oppose the phosphatidylinositol-3-kinase/AKT pathway by dephosphorylation of phosphatidylinositol-3,4,5-triphosphate (PIP3). How cytosolic PTEN interacts with its main substrate, PIP3, localized at the inner face of plasma membrane remains unclear. Here we show that PTEN is covalently modified by SUMO1 at both K(266) and K(254) sites in the C2 domain of PTEN. SUMO1 modification at K(266) located in the CBR3 loop, which has a central role in PTEN membrane association, mainly facilitates cooperative binding of PTEN to the plasma membrane by electrostatic interactions. This results in the downregulation of the phosphatidylinositol-3 kinase/AKT pathway and consequently, suppression of anchorage-independent cell proliferation and tumour growth in vivo. Our data demonstrate a molecular mechanism whereby SUMO1 modification is required for PTEN tumour suppressor function by controlling PTEN membrane association and regulation of the phosphatidylinositol-3 kinase/AKT pathway.