Condensins are molecular motors that compact DNA for chromosome segregation and gene regulation. In vitro experiments have begun to elucidate the mechanics of condensin function but how condensin loading and translocation along DNA controls eukaryotic chromosome structure in vivo remains poorly understood. To address this question, we took advantage of a specialized condensin, which organizes the 3D conformation of X chromosomes to mediate dosage compensation (DC) in C. elegans. Condensin DC is recruited and spreads from a small number of recruitment elements on the X chromosome (rex). We found that ectopic insertion of rex sites on an autosome leads to bidirectional spreading of the complex over hundreds of kilobases. On the X chromosome, strong rex sites contain multiple copies of a 12-bp sequence motif and act as TAD borders. Inserting a strong rex and ectopically recruiting the complex on the X chromosome or an autosome creates a loop-anchored TAD. Unlike the CTCF system, which controls TAD formation by cohesin, direction of the 12-bp motif does not control the specificity of loops. In an X;V fusion chromosome, condensin DC linearly spreads into V and increases 3D DNA contacts, but fails to form TADs in the absence of rex sites. Finally, we provide in vivo evidence for the loop extrusion hypothesis by targeting multiple dCas9-Suntag complexes to an X chromosome repeat region. Consistent with linear translocation along DNA, condensin DC accumulates at the block site. Together, our results support a model whereby strong rex sites act as insulation elements through recruitment and bidirectional spreading of condensin DC molecules and form loop-anchored TADs.