Sister chromatid cohesion is essential for proper segregation of the genome in mitosis and meiosis. Central to this process is cohesin, a multi-protein complex conserved from yeast to human. Previous genetic studies in fungi have identified Pds5/BimD/Spo76 as an additional factor implicated in cohesion. Here we describe the biochemical and functional characterization of two Pds5-like proteins, Pds5A and Pds5B, from vertebrate cells. In HeLa cells, Pds5 proteins physically interact with cohesin and associate with chromatin in a cohesin-dependent manner. Depletion of the cohesin subunit Scc1 by RNA interference leads to the assembly of chromosomes with severe cohesion defects. A similar yet milder set of defects is observed in cells with reduced levels of Pds5A or Pds5B. In Xenopus egg extracts, mitotic chromosomes assembled in the absence of Pds5A and Pds5B display no discernible defects in arm cohesion, but centromeric cohesion is apparently loosened. Unexpectedly, these chromosomes retain an unusually high level of cohesin. Thus, Pds5 proteins seem to affect the stable maintenance of cohesin-mediated cohesion and its efficient dissolution during mitosis. We propose that Pds5 proteins play both positive and negative roles in sister chromatid cohesion, possibly by directly modulating the dynamic interaction of cohesin with chromatin. This idea would explain why cells lacking Pds5 function display rather complex and diverse phenotypes in different organisms.