The sumoylation of CCAAT/enhancer-binding proteins (C/EBPs) by small ubiquitin-related modifier-1 (SUMO-1) has been reported recently. In this study, we investigated the functional role of the sumoylation of C/EBPalpha in the differentiation of hepatocytes. The amount of sumoylated C/EBPalpha gradually decreased during the differentiation, which suggests that the sumoylation is important for the control of growth/differentiation especially in the fetal liver. To analyze the function of the sumoylation of C/EBPalpha in liver-specific gene expression, we studied its effects on the expression of the albumin gene. The C/EBPalpha-mediated transactivation of the albumin gene was reduced by sumoylation of C/EBPalpha in primary fetal hepatocytes. The enhancement of C/EBPalpha-mediated transactivation by BRG1, a core subunit of the SWI/SNF chromatin remodeling complex, was hampered by sumoylation in a luciferase reporter assay. In addition, we discovered that sumoylation of C/EBPalpha blocked its inhibitory effect on cell proliferation by leading to the disruption of a proliferation-inhibitory complex because of a failure of the sumoylated C/EBPalpha to interact with BRG1. BRG1 was recruited to the dihydrofolate reductase promoter in nonproliferating C33a cells but was not detected in proliferating cells where C/EBPalpha, BRG1, and SUMO-1 were overexpressed. This result suggests that BRG1 down-regulates the expression of the dihydrofolate reductase gene. These findings provide the insight that SUMO acts as a space regulator, which affects protein-protein interactions.