Several studies have addressed the importance of various ubiquitin‐like (UBL) post‐translational modifiers. These UBLs are covalently linked to most, if not all, target protein(s) through an enzymatic cascade analogous to ubiquitylation, consisting of E1 (activating), E2 (conjugating), and E3 (ligating) enzymes. In this report, we describe the identification of a novel ubiquitin‐fold modifier 1 (Ufm1) with a molecular mass of 9.1 kDa, displaying apparently similar tertiary structure, although lacking obvious sequence identity, to ubiquitin. Ufm1 is first cleaved at the C‐terminus to expose its conserved Gly residue. This Gly residue is essential for its subsequent conjugating reactions. The C‐terminally processed Ufm1 is activated by a novel E1‐like enzyme, Uba5, by forming a high‐energy thioester bond. Activated Ufm1 is then transferred to its cognate E2‐like enzyme, Ufc1, in a similar thioester linkage. Ufm1 forms several complexes in HEK293 cells and mouse tissues, revealing that it conjugates to the target proteins. Ufm1, Uba5, and Ufc1 are all conserved in metazoa and plants but not in yeast, suggesting its potential roles in various multicellular organisms.