Nuclear domain 10 (ND10), also referred to as nuclear bodies, are discrete interchromosomal accumulations of several proteins including promyelocytic leukemia protein (PML) and Sp100. In this study, we investigated the mechanism of ND10 assembly by identifying proteins that are essential for this process using cells lines that lack individual ND10-associated proteins. We identified the adapter protein Daxx and BML, the RecQ helicase missing in Bloom syndrome, as new ND10-associated proteins. PML, but not BLM or Sp100, was found to be responsible for the proper localization of all other ND10-associated proteins since they are dispersed in PML-/- cells. Introducing PML into this cell line by transient expression or fusion with PML-producing cells recruited ND10-associated proteins into de novo formed ND10 attesting to PMLs essential nature in ND10 formation. In the absence of PML, Daxx is highly enriched in condensed chromatin. Its recruitment to ND10 from condensed chromatin requires a small ubiquitin-related modifier (SUMO-1) modification of PML and reflects the interaction between the COOH-terminal domain of Daxx and PML. The segregation of Daxx from condensed chromatin in the absence of PML to ND10 by increased accumulation of SUMO-1-modified PML suggests the presence of a variable equilibrium between these two nuclear sites. Our findings identify the basic requirements for ND10 formation and suggest a dynamic mechanism for protein recruitment to these nuclear domains controlled by the SUMO-1 modification state of PML.