Cullin-based E3 ubiquitin ligases are activated through covalent modification of the cullin subunit by the ubiquitin-like protein Nedd8. Cullin neddylation dissociates the ligase assembly inhibitor Cand1, and promotes E2 recruitment and ubiquitin transfer by inducing a conformational change. Here, we have identified and characterized Lag2 as a likely Saccharomyces cerevisiae orthologue of mammalian Cand1. Similar to Cand1, Lag2 directly interacts with non-neddylated yeast cullin Cdc53 and prevents its neddylation in vivo and in vitro. Binding occurs through a conserved C-terminal beta-hairpin structure that inserts into the Skp1-binding pocket on the cullin, and an N-terminal motif that covers the neddylation lysine. Interestingly, Lag2 is itself neddylated in vivo on a lysine adjacent to this N-terminal-binding site. Overexpression of Lag2 inhibits Cdc53 activity in strains defective for Skp1 or neddylation functions, implying that these activities are important to counteract Lag2 in vivo. Our results favour a model in which binding of substrate-specific adaptors triggers release of Cand1/Lag2, whereas subsequent neddylation of the cullin facilitates the removal and prevents re-association of Lag2/Cand1.