Posttranslational modifications by ubiquitin-like proteins (UBL) are essential for nearly all cellular processes. Ubiquitin-related modifier 1 (Urm1) is a non-canonical UBL that plays a key role in tRNA anticodon thiolation as a sulfur carrier protein (SCP). While Urm1 has also been observed to conjugate directly to target proteins like other UBLs, the mechanism of attachment as well as how the SCP properties of Urm1 may impact its conjugation is unknown. Here, we reconstitute the covalent attachment of Urm1 to various cellular target proteins in vitro, revealing that, unlike other known UBLs, this process is E2/E3-independent, and conjugates to lysine, serine, threonine residues and requires oxidative stress conditions. We determined the crystal structures of the peroxiredoxin Ahp1 before and after the covalent attachment of Urm1. Strikingly, we show that Urm1 actively transfers sulfur atoms to proteins as part of its conjugation reaction, resulting in the persulfidation of a cysteine residue in the target protein. Our results redefine Urm1 as a key evolutionary link between prokaryotic SCPs and the plethora of UBL modifications in eukaryotes and demonstrate a critical role for Urm1 in protecting proteins during oxidative stress.