Development of rod photoreceptors in the mammalian retina is critically dependent on the basic motif-leucine zipper transcription factor NRL (neural retina leucine zipper). In the absence of NRL, photoreceptor precursors in mouse retina produce only cones that primarily express S-opsin. Conversely, ectopic expression of NRL in post-mitotic precursors leads to a rod-only retina. To explore the role of signaling molecules in modulating NRL function, we identified putative sites of post-translational modification in the NRL protein by in silico analysis. Here, we demonstrate the sumoylation of NRL in vivo and in vitro, with two small ubiquitin-like modifier (SUMO) molecules attached to the Lys-20 residue. NRL-K20R and NRL-K20R/K24R sumoylation mutants show reduced transcriptional activation of Nr2e3 and rhodopsin promoters (two direct targets of NRL) in reporter assays when compared with wild-type NRL. Consistent with this, in vivo electroporation of the NRL-K20R/K24R mutant into newborn Nrl(-/-) mouse retina leads to reduced Nr2e3 activation and only a partial rescue of the Nrl(-/-) phenotype in contrast to the wild-type NRL that is able to convert cones to rod photoreceptors. Although PIAS3 (protein inhibitor of activated STAT3), an E3-SUMO ligase implicated in photoreceptor differentiation, can be immunoprecipitated with NRL, there appears to be redundancy in E3 ligases, and PIAS3 does not seem to be essential for NRL sumoylation. Our studies suggest an important role of sumoylation in fine-tuning the activity of NRL and thereby incorporating yet another layer of control in gene regulatory networks involved in photoreceptor development and homeostasis.