Heterochromatin is nucleated at a specific site and subsequently spreads into distal sequences through multiple interactions between modified histones and nonhistone proteins. In the yeast Saccharomyces cerevisiae, these nonhistone proteins include Sir2, Sir3, and Sir4. We have previously shown that loss of the C-terminal Rap1 domain containing Sir3 and Sir4 association sites can be overcome by tethering a 144-amino-acid C-terminal domain (CTD) of Sir3 adjacent to the telomere. Here, we explore the substructure and functions of the CTD. We demonstrate that the CTD is the minimum domain for Sir3 homodimerization, a function that is conserved in related yeasts. However, CTD heterodimers associate at only low efficiencies and correspondingly have low levels of tethered silencing, consistent with an essential role for dimerization in tethered silencing. Six missense alleles were generated, with ctd-Y964A producing the most extreme phenotypes when tethered to the LexA binding sites. Although ctd-Y964A is capable of dimerization, telomere silencing is abrogated, indicating that the CTD serves a second essential function in silencing. Chromatin immunoprecipitation analyses of wild-type and ctd-Y964A mutant cells indicate an association of the CTD with the deacetylated histone tails of H3 and H4 that is necessary for the recruitment of Sir3. The efficiency of spreading depends upon the apparent stoichiometry and stability during the initiation event. The predicted Cdc6 domain III winged-helix structure may well be responsible for dimerization.