The Bloom syndrome gene, BLM, encodes a RecQ DNA helicase that when absent from the cell results in genomic instability and cancer predisposition. We show here that BLM is a substrate for small ubiquitin-like modifier (SUMO) modification, with lysines at K317, K331, K334 and K347 being preferred sites of modification. Unlike normal BLM, a double mutant BLM protein with lysine to arginine substitutions at residues 317 and 331 was not modified by SUMO, and it failed to localize efficiently to the PML nuclear bodies. Rather, double mutant BLM protein induced the formation of DNA damage-induced foci (DDI) that contained BRCA1 protein and phosphorylated histone H2AX. Double mutant BLM only partially complemented the genomic instability phenotypes of Bloom syndrome cells as assessed by sister-chromatid exchange and micronuclei formation assays. These results constitute evidence that BLM is a DNA damage sensor that signals the formation of DDI, and they establish SUMO modification as a negative regulator of BLM's signaling function.