Cohesin mediates sister chromatid cohesion and contributes to the organization of interphase chromatin through DNA looping. In vertebrate somatic cells, cohesin consists of Smc1, Smc3, Rad21, and either SA1 or SA2. Three additional factors Pds5, Wapl, and Sororin bind to cohesin and modulate its dynamic association with chromatin. There are two Pds5 proteins in vertebrates, Pds5A and Pds5B, but their functional specificity remains unclear. Here, we demonstrate that Pds5 proteins are essential for cohesion establishment by allowing Smc3 acetylation by the cohesin acetyl transferases (CoATs) Esco1/2 and binding of Sororin. While both proteins contribute to telomere and arm cohesion, Pds5B is specifically required for centromeric cohesion. Furthermore, reduced accumulation of Aurora B at the inner centromere region in cells lacking Pds5B impairs its error correction function, promoting chromosome mis-segregation and aneuploidy. Our work supports a model in which the composition and function of cohesin complexes differs between different chromosomal regions.