Heterochromatin mediates many diverse functions in the cell nucleus, including centromere function, gene silencing and nuclear organization. The condensed structure of pericentromeric heterochromatin is associated with the presence of a regular arrangement of nucleosomes, which might be due in part to the underlying sequence of the satellite repeats. Recent studies identified methylation of the histone H3 tail as an epigenetic mark that affects acetylation and phosphorylation of histone tail residues and also acts as a recognition signal for binding of heterochromatin protein 1 (HP1). The decision to silence or activate heterochromatic genes appears to be the result of a balance between negative factors that promote the formation of condensed higher-order chromatin structure, and positively acting transcription factors that bind to regulatory sequences and activate gene expression.