The cohesion of sister chromatids is mediated by cohesin, a protein complex containing members of the structural maintenance of chromosome (Smc) family. How cohesins tether sister chromatids is not yet understood. Here, we mutate SMC1, the gene encoding a cohesin subunit of budding yeast, by random insertion dominant negative mutagenesis to generate alleles that are highly informative for cohesin assembly and function. Cohesins mutated in the Hinge or Loop1 regions of Smc1 bind chromatin by a mechanism similar to wild-type cohesin, but fail to enrich at cohesin-associated regions (CARs) and pericentric regions. Hence, the Hinge and Loop1 regions of Smc1 are essential for the specific chromatin binding of cohesin. This specific binding and a subsequent Ctf7/Eco1-dependent step are both required for the establishment of cohesion. We propose that a cohesin or cohesin oligomer tethers the sister chromatids through two chromatin-binding events that are regulated spatially by CAR binding and temporally by Ctf7 activation, to ensure cohesins crosslink only sister chromatids.