The serine/threonine protein phosphatase 5 (PP5) regulates hormone and stress-induced signaling networks. PP5 has been suggested to exist largely in a ‘closed’ and autoinhibitory state whereas the ‘open’ conformation is required for activity. Additionally, PP5 is subject to post-translational modification (PTMs), however, the impact of PTMs on PP5 conformation, activity, and substrate release in cells remains elusive. Here we identified that SUMOylation of K430 in the catalytic domain of PP5 facilitates substrate release. Phosphorylation of PP5-T362 and activation is pre-requisite for SUMOylation suggesting the ordered addition of PTMs carefully regulates PP5 function in cells. Additionally, our quantitative Förster Resonance Energy Transfer (FRET) in live mammalian cells showed that phosphorylation and SUMOylation of PP5 favor a ‘closed’ conformation that functionally is quite different from the autoinhibitory state of PP5. This suggests that PP5 samples multiple conformational states within a cell as a result of PTMs, which do not necessarily correlate with PP5 activity. Furthermore, comparative proteomic analysis of PP5-WT and K430R identified many new potential substrates of PP5. Taken together, our data presented here demonstrate a crucial regulatory step of PP5 activity, SUMOylation of K430R. Notably, the characteristics of a non-SUMOylatable PP5 mutant, K430R, allow rapid identification of new PP5 substrates.