Eukaryotic cells employ three SMC (structural maintenance of chromosomes) complexes to control DNA folding and topology. The Smc5/6 complex plays roles in DNA repair and in preventing the accumulation of deleterious DNA junctions. To elucidate how specific features of Smc5/6 govern these functions, we reconstituted the yeast holo-complex. We found that the Nse5/6 sub-complex strongly inhibited the Smc5/6 ATPase by preventing productive ATP binding. This inhibition was relieved by plasmid DNA binding but not by short linear DNA, while opposing effects were observed without Nse5/6. We uncovered two binding sites for Nse5/6 on Smc5/6, based on an Nse5/6 crystal structure and cross-linking mass spectrometry data. One binding site is located at the Smc5/6 arms and one at the heads, the latter likely exerting inhibitory effects on ATP hydrolysis. Cysteine cross-linking demonstrated that the interaction with Nse5/6 anchored the ATPase domains in a non-productive state, which was destabilized by ATP and DNA. Under similar conditions, the Nse4/3/1 module detached from the ATPase. Altogether, we show how DNA substrate selection is modulated by direct inhibition of the Smc5/6 ATPase by Nse5/6.