The mammalian heterochromatin protein 1 (HP1) family of proteins was recently shown to be involved in transient repression of inducible promoters. One of these promoters is the HIV1 long terminal repeat, which, during viral latency, recruits a non-processive RNA polymerase II (RNAPII) that synthesizes a short regulatory transcript. Here, we have used this promoter to examine the interplay of HP1alpha, HP1beta and HP1gamma with RNAPII. We find that, in the absence of stimulation, HP1beta is present on the promoter together with the non-processive RNAPII and functions as a negative regulator. On activation, HP1beta bound to methylated H3K9 is rapidly released concurrent with histone H3 phospho-acetylation, and is replaced by HP1gamma. This isoform localizes to the promoter but also inside the coding region, together with the processive RNAPII. Our data show that HP1 recruitment-release is a sequential mechanism that is precisely regulated and highly dependent on transcription.