The retina-specific chaperone AIPL1 is essential for the correct assembly of phosphodiesterase 6 (PDE6), which is a pivotal effector enzyme for phototransduction and vision because it hydrolyzes cGMP. AIPL1 interacts with the cytokine-inducible ubiquitin-like modifier FAT10 that gets covalently conjugated to hundreds of proteins and targets its conjugation substrates for proteasomal degradation, but whether FAT10 affects PDE6 function or turnover is unknown. Here, we show that FAT10 mRNA is expressed in human retina and identify rod PDE6 as a retina-specific substrate of FAT10 conjugation. We found that AIPL1 stabilizes the FAT10 monomer as well as the PDE6-FAT10 conjugate. Additionally, we elucidated the functional consequences of PDE6 FAT10ylation. On the one hand, we demonstrate that FAT10 targets PDE6 for proteasomal degradation by formation of a covalent isopeptide linkage. On the other hand, FAT10 inhibits PDE6 cGMP hydrolyzing activity by non-covalently interacting with the PDE6 GAFa and catalytic domains. Therefore, FAT10 may contribute to loss of PDE6 and, as a consequence, degeneration of retinal cells in eye diseases linked to inflammation and inherited blindness causing mutations in AIPL1.