Specification of retinal rod photoreceptors is determined by several different transcription factors that activate expression of rod-specific genes and repress expression of cone photoreceptor-specific genes. The mechanism by which this dual regulation occurs is unclear. We have found that Pias3, a transcriptional coregulator and E3 SUMO ligase that is selectively expressed in developing photoreceptors, promotes the differentiation of rod photoreceptors while preventing rods from adopting cone photoreceptor-like characteristics. Pias3 binds the photoreceptor-specific transcription factors Crx and Nr2e3 and is specifically targeted to the promoters of photoreceptor-specific genes. Pias3 SUMOylates Nr2e3, converting it into a potent repressor of cone-specific gene expression. Rod- and cone-specific promoters are bound by hyperSUMOylated proteins in rod photoreceptors, and blocking SUMOylation in photoreceptors results in cells with morphological and molecular features of cones and an absence of rod-specific markers. Our data thus identify Pias3-mediated SUMOylation of photoreceptor-specific transcription factors as a key mechanism of rod specification.