Nucleophosmin/B23 is a major multifunctional nucleolar phosphoprotein that plays a critical role in ribosome biogenesis and cell proliferation. Arf tumor suppressor binds B23 and enhances its sumoylation. However, the biological effects of this event remain unknown. Here we show that B23 is sumoylated on both Lysine 230 and 263 residues, but the latter is the major one. Mutation of K263, but not K230, into R abolishes its centrosomal and nucleolar residency. Moreover, Rb binds to wild-type B23, but fails to interact with K263R. Sumoylation enhances B23 binding to Rb. Consequently, B23 potently stimulates E2F1-mediated transcriptional activity, which is abolished in B23 K263R. Further, K263R mutation makes B23 vulnerable to caspase-3 cleavage and sensitizes cells to apoptosis. Surprisingly, K230R mutant strongly binds to phosphatidylinositol-3,4,5-trisphosphate and suppresses DNA fragmentation. Thus, B23 sumoylation regulates its subcellular localization, cell proliferation, and survival activities.