Sequence-specific transcription factors (TFs) represent one of the largest groups of proteins that is targeted for SUMO post-translational modification, in both yeast and humans. SUMO modification can have diverse effects, but recent studies showed that sumoylation reduces the interaction of multiple TFs with DNA in living cells. Whether this relates to a general role for sumoylation in TF binding site selection, however, has not been fully explored because few genome-wide studies aimed at studying such a role have been reported. To address this, we used genome-wide analysis to examine how sumoylation regulates Sko1, a yeast bZIP TF with hundreds of known binding sites. We find that Sko1 is sumoylated at Lys 567 and, although many of its targets are osmoresponse genes, the level of Sko1 sumoylation is not stress-regulated and the modification does not depend or impinge on its phosphorylation by the osmostress kinase Hog1. We show that Sko1 mutants that cannot bind DNA are not sumoylated, but attaching a heterologous DNA binding domain restores the modification, implicating DNA binding as a major determinant for Sko1 sumoylation. Genome-wide chromatin immunoprecipitation (ChIP-seq) analysis shows that a sumoylation-deficient Sko1 mutant displays increased occupancy levels at its numerous binding sites, which inhibits the recruitment of the Hog1 kinase to some induced osmostress genes. This strongly supports a general role for sumoylation in reducing the association of TFs with chromatin. Extending this result, remarkably, sumoylation-deficient Sko1 binds numerous additional promoters that are not normally regulated by Sko1 but contain sequences that resemble the Sko1 binding motif. Our study points to an important role for sumoylation in modulating the interaction of a DNA-bound TF with chromatin to increase the specificity of TF-DNA interactions.