Condensin is a conserved SMC complex that uses its ATPase machinery to structure genomes, but how it does so is largely unknown. We show that condensin's ATPase has a dual role in chromosome condensation. Mutation of one ATPase site impairs condensation, while mutating the second site results in hyperactive condensin that compacts DNA faster than wild-type, both in vivo and in vitro. Whereas one site drives loop formation, the second site is involved in the formation of more stable higher-order Z loop structures. Using hyperactive condensin I, we reveal that condensin II is not intrinsically needed for the shortening of mitotic chromosomes. Condensin II rather is required for a straight chromosomal axis and enables faithful chromosome segregation by counteracting the formation of ultrafine DNA bridges. SMC complexes with distinct roles for each ATPase site likely reflect a universal principle that enables these molecular machines to intricately control chromosome architecture.