SUMO (small ubiquitin-related modifier)-specific proteases catalyse the maturation and de-conjugation processes of the sumoylation pathway and modulate various cellular responses including nuclear metabolism and cell cycle progression. The active-site cysteine residue is conserved among all known SUMO-specific proteases and is not substitutable by serine in the hydrolysis reactions demonstrated previously in yeast. We report here that the catalytic domain of human protease SENP1 (SUMO-specific protease 1) mutant SENP1C^C603S carrying a mutation of cysteine to serine at the active site is inactive in maturation and de-conjugation reactions. To further understand the hydrolytic mechanism catalysed by SENP1, we have determined, at 2.8 Å resolution (1 Å=0.1 nm), the X-ray structure of SENP1C^C603S–SUMO-1 complex. A comparison of the structure of SENP2–SUMO-1 suggests strongly that SUMO-specific proteases require a self-conformational change prior to cleavage of peptide or isopeptide bond in the maturation and de-conjugation processes respectively. Moreover, analysis of the interface of SENP1 and SUMO-1 has led to the identification of four unique amino acids in SENP1 that facilitate the binding of SUMO-1. By means of an in vitro assay, we further demonstrate a novel function of SENP1 in hydrolysing the thioester linkage in E1-SUMO and E2-SUMO complexes. The results disclose a new mechanism of regulation of the sumoylation pathway by the SUMO-specific proteases.