Structural Maintenance of Chromosomes (SMC) complexes are important for many aspects of the chromosomal organization. Unlike cohesin and condensin, the SMC5/6 complex contains a variant RING domain carried by its Nse1 subunit. RING domains are characteristic for ubiquitin ligases, and human NSE1 has been shown to possess ubiquitin-ligase activity in vitro. However, other studies were unable to show such activity. Here, we confirm Nse1 ubiquitin-ligase activity using purified Schizosaccharomyces pombe proteins. We demonstrate that the Nse1 ligase activity is stimulated by Nse3 and Nse4. We show that Nse1 specifically utilizes Ubc13/Mms2 E2 enzyme and interacts directly with ubiquitin. We identify the Nse1 mutation (R188E) that specifically disrupts its E3 activity and demonstrate that the Nse1-dependent ubiquitination is particularly important under replication stress. Moreover, we determine Nse4 (lysine K181) as the first known SMC5/6-associated Nse1 substrate. Interestingly, abolition of Nse4 modification at K181 leads to suppression of DNA-damage sensitivity of other SMC5/6 mutants. Altogether, this study brings new evidence for Nse1 ubiquitin ligase activity, significantly advancing our understanding of this enigmatic SMC5/6 function.