Chromatin insulators are special regulatory elements involved in modulation of enhancer-promoter interactions. The best studied insulators in Drosophila require Suppressor of Hairy Wing [Su(Hw)], Modifier of mdg4 [Mod(mdg4)] and centrosomal 190 kDa (CP190) proteins to be functional. These insulator proteins are colocalized in nuclear speckles named insulator bodies. Here, we demonstrate that post-translational modification of insulator proteins by small ubiquitin-like modifier (SUMO) and intact CP190 protein is crucial for insulator body formation. Inactivation of SUMO binding sites in Mod(mdg4)-67.2 leads to the inability of the mutant protein and Su(Hw) to be assembled into insulator bodies. In vivo functional tests show that a smaller amount of intact Mod(mdg4)-67.2, compared with the mutant protein, is required to restore the normal activity of the Su(Hw) insulator. However, high expression of mutant Mod(mdg4)-67.2 completely rescues the insulator activity, indicating that sumoylation is not necessary for enhancer blocking. These results suggest that insulator bodies function as a depot of sumoylated proteins that are involved in insulation and can facilitate insulator complex formation, but are nonessential for insulator action.