bIn response to genotoxic stress, ATR and ATM kinases phosphorylate H2A in fungi and H2AX in animals on a C-terminal serine. The resulting modified histone, called ␥H2A, recruits chromatin-binding proteins that stabilize stalled replication forks or promote DNA double-strand-break repair. To identify genomic loci that might be prone to replication fork stalling or DNA breakage in Neurospora crassa, we performed chromatin immunoprecipitation (ChIP) of ␥H2A followed by next-generation sequencing (ChIP-seq). ␥H2A-containing nucleosomes are enriched in Neurospora heterochromatin domains. These domains are comprised of A·T-rich repetitive DNA sequences associated with histone H3 methylated at lysine-9 (H3K9me), the H3K9me-binding protein heterochromatin protein 1 (HP1), and DNA cytosine methylation. H3K9 methylation, catalyzed by DIM-5, is required for normal ␥H2A localization. In contrast, ␥H2A is not required for H3K9 methylation or DNA methylation. Normal ␥H2A localization also depends on HP1 and a histone deacetylase, HDA-1, but is independent of the DNA methyltransferase DIM-2. ␥H2A is globally induced in dim-5 mutants under normal growth conditions, suggesting that the DNA damage response is activated in these mutants in the absence of exogenous DNA damage. Together, these data suggest that heterochromatin formation is essential for normal DNA replication or repair.