The ring-shaped cohesin complex orchestrates long-range DNA interactions to mediate sister chromatid cohesion and other aspects of chromosome structure and function. In the yeast Saccharomyces cerevisiae, the complex binds discrete sites along chromosomes, including positions within and around genes. Transcriptional activity redistributes the complex to the 3′ ends of convergently oriented gene pairs. Despite the wealth of information about where cohesin binds, little is known about cohesion at individual chromosomal binding sites and how transcription affects cohesion when cohesin complexes redistribute. In this study, we generated extrachromosomal DNA circles to study cohesion in response to transcriptional induction of a model gene, URA3. Functional cohesin complexes loaded onto the locus via a poly(dA:dT) tract in the gene promoter and mediated cohesion before induction. Upon transcription, the fate of these complexes depended on whether the DNA was circular or not. When gene activation occurred before DNA circularization, cohesion was lost. When activation occurred after DNA circularization, cohesion persisted. The presence of a convergently oriented gene also prevented transcription-driven loss of functional cohesin complexes, at least in M phase-arrested cells. The results are consistent with cohesin binding chromatin in a topological embrace and with transcription mobilizing functional complexes by sliding them along DNA.T he protein complex known as cohesin organizes eukaryotic genomes into structures that segregate faithfully between dividing cells. The complex was first discovered for its role in mediating sister chromatid cohesion, but it is now known to participate in numerous aspects of chromosome biology (1, 2). Cohesin is clinically relevant because mutations in subunits of the complex or in factors that load and activate the complex lead to developmental disorders such as Cornelia de Lange syndrome, Roberts syndrome, and Warsaw breakage syndrome (3, 4).Cohesin is a ring-shaped complex composed of four subunits named Smc1, Smc3, Scc3, and Mcd1/Scc1 in budding yeast. The complex is thought to embrace DNA topologically with chromatin fibers passing through a central open channel (5-7). A substantial body of work supports a model in which cohesion arises from single cohesin complexes that embrace both sister chromatids [the double embrace model (6)]. Whether the central channel is large enough to accommodate both chromatids has recently been brought into question (8). In addition, the behavior of cohesin has not always been consistent with a double embrace by single complexes (for examples, see refs. 9-11). These situations usually involve a perturbation that causes loss of cohesion but not a loss of cohesin binding from chromatin. Such results force consideration of alternative models in which cohesin complexes embrace only one chromatid topologically and interact with other cohesin complexes or chromatin features to mediate cohesion (9,11,12).Cohesin binds densely in centromeric regions of chromos...