Transcriptional silencing in Saccharomyces cerevisiae occurs at the silent mating-type loci HML and HMR, at telomeres, and at the ribosomal DNA (rDNA) locus RDN1. Silencing in the rDNA occurs by a novel mechanism that depends on a single Silent Information Regulator (SIR) gene, SIR2. SIR4, essential for other silenced loci, paradoxically inhibits rDNA silencing. In this study, we elucidate a regulatory mechanism for rDNA silencing based on the finding that rDNA silencing strength directly correlates with cellular Sir2 protein levels. The endogenous level of Sir2p was shown to be limiting for rDNA silencing. Furthermore, small changes in Sir2p levels altered rDNA silencing strength. In rDNA silencing phenotypes, sir2 mutations were shown to be epistatic to sir4 mutations, indicating that SIR4 inhibition of rDNA silencing is mediated through SIR2. Furthermore, rDNA silencing is insensitive to SIR3 overexpression, but is severely reduced by overexpression of full-length Sir4p or a fragment of Sir4p that interacts with Sir2p. This negative effect of SIR4 overexpression was overridden by co-overexpression of SIR2, suggesting that SIR4 directly inhibits the rDNA silencing function of SIR2. Finally, genetic manipulations of SIR4 previously shown to promote extended life span also resulted in enhanced rDNA silencing. We propose a simple model in which telomeres act as regulators of rDNA silencing by competing for limiting amounts of Sir2 protein.