Chromosome rearrangements which place euchromatic genes adjacent to a heterochromatic breakpoint frequently result in gene repression (position-effect variegation). This repression is thought to reflect the spreading of a heterochromatic structure into neighboring euchromatin. Two allelic dominant suppressors of position-effect variegation were found to contain mutations within the gene encoding the heterochromatin-specific chromosomal protein HP-1. The site of mutation for each allele is given: one converts Lys169 into a nonsense (ochre) codon, while the other is a frameshift after Ser10. In flies heterozygous for one of the mutant alleles (Su(var)2-504), a truncated HP-1 protein was detectable by Western blot analysis. An HP-1 minigene, consisting of HP-1 cDNA under the control of an Hsp70 heat-inducible promoter, was transduced into flies by P element-mediated germ line transformation. Heat-shock driven expression of this minigene results in elevated HP-1 protein level and enhancement of position-effect variegation. Levels of variegating gene expression thus appear to depend upon the level of expression of a heterochromatin-specific protein. The implications of these observations for mechanism of heterochromatic position effects and heterochromatin function are discussed.