In most eukaryotes, the histone methyltransferase SU(VAR)3-9 and its orthologues play a major role in the function of centromeric heterochromatin. Although the methyltransferase domain is required for the formation of a fully functional centromere, mutations within other regions of the gene such as the N-terminus also have a strong impact on its in vivo function. To analyze the contribution of the N-terminus on the methyltransferase activity, we have expressed the full-length Drosophila SU(VAR)3-9 (dSU(VAR)3-9) together with various N-terminal deletions in Escherichia coli and analyzed the structural and enzymatic properties of the purified recombinant enzymes. Full-length dSU(VAR)3-9 specifically methylates lysine 9 within histone H3 on peptides, on intact histones, and, to a lesser extent, on nucleosomes. A detailed analysis of the reaction products shows that dSU(VAR)3-9 adds two methyl groups to an unmethylated H3 tail peptide in a nonprocessive manner. The full-length enzyme elutes with an apparent molecular weight of 160 kDa from a gel filtration column, which indicates the formation of a dimer. This property is dependent on an intact N-terminus. In contrast to the full-length enzymes, proteins lacking the N-terminus fail to dimerize, and show a 10-fold lower specific activity and a linear dependence of methyltransferase activity on enzyme concentration. A N-terminal peptide containing amino acids 1-152 of dSU(VAR)3-9 is sufficient to mediate this interaction in vitro. The dimerization of dSU(VAR)3-9 and the subsequent increase of its methyltransferase activity provide a starting point to understand the molecular details of the formation of heterochromatic structures in vivo.