Heterochromatin protein 1 (HP1) is a key component of constitutive heterochromatin in Drosophila and is required for stable epigenetic gene silencing classically observed as position effect variegation. Less is known of the family of mammalian HP1 proteins, which may be euchromatic, targeted to expressed loci by repressor-corepressor complexes, and retained there by Lys 9-methylated histone H3 (H3-MeK9). To characterize the physical properties of euchromatic loci bound by HP1, we developed a strategy for regulated recruitment of HP1 to an expressed transgene in mammalian cells by using a synthetic, hormone-regulated KRAB repression domain. We show that its obligate corepressor, KAP1, can coordinate all the machinery required for stable gene silencing. In the presence of hormone, the transgene is rapidly silenced, spatially recruited to HP1-rich nuclear regions, assumes a compact chromatin structure, and is physically associated with KAP1, HP1, and the H3 Lys 9-specific methyltransferase, SETDB1, over a highly localized region centered around the promoter. Remarkably, silencing established by a short pulse of hormone is stably maintained for >50 population doublings in the absence of hormone in clonal-cell populations, and the silent transgenes in these clones show promoter hypermethylation. Thus, like variegation in Drosophila, recruitment of mammalian HP1 to a euchromatic promoter can establish a silenced state that is epigenetically heritable.