KAP1/TIF1†is proposed to be a universal corepressor protein for the KRAB zinc finger protein (KRAB-zfp) superfamily of transcriptional repressors. To characterize the role of KAP1 and KAP1-interacting proteins in transcriptional repression, we investigated the regulation of stably integrated reporter transgenes by hormoneresponsive KRAB and KAP1 repressor proteins. Here, we demonstrate that depletion of endogenous KAP1 levels by small interfering RNA (siRNA) significantly inhibited KRAB-mediated transcriptional repression of a chromatin template. Similarly, reduction in cellular levels of HP1âŁ/â€/â„ and SETDB1 by siRNA attenuated KRAB-KAP1 repression. We also found that direct tethering of KAP1 to DNA was sufficient to repress transcription of an integrated transgene. This activity is absolutely dependent upon the interaction of KAP1 with HP1 and on an intact PHD finger and bromodomain of KAP1, suggesting that these domains function cooperatively in transcriptional corepression. The achievement of the repressed state by wild-type KAP1 involves decreased recruitment of RNA polymerase II, reduced levels of histone H3 K9 acetylation and H3K4 methylation, an increase in histone occupancy, enrichment of trimethyl histone H3K9, H3K36, and histone H4K20, and HP1 deposition at proximal regulatory sequences of the transgene. A KAP1 protein containing a mutation of the HP1 binding domain failed to induce any change in the histone modifications associated with DNA sequences of the transgene, implying that HP1-directed nuclear compartmentalization is required for transcriptional repression by the KRAB/KAP1 repression complex. The combination of these data suggests that KAP1 functions to coordinate activities that dynamically regulate changes in histone modifications and deposition of HP1 to establish a de novo microenvironment of heterochromatin, which is required for repression of gene transcription by KRAB-zfps.Genetic and epigenetic programs that control proper spatial and temporal patterns of gene expression are instrumental for pluripotent stem cells to determine cellular identity and maintain homeostasis of adult metazoans. Though historically viewed as a passive packaging unit, remodeling of chromatin structure has emerged as a key target for programming of gene expression during early embryogenesis and tissue-specific gene transcription. The dynamic regulation of chromatin organization appears to be accomplished in part by at least four families of proteins, including the following: (i) macromolecular protein complexes that utilize energy from ATP hydrolysis to disrupt DNA-protein interactions; (ii) proteins with intrinsic enzymatic activity to posttranslationally modify the core histones; (iii) nonhistone chromosomal proteins; and (iv) histone variants. Increasing experimental evidence indicates that the combinatorial use of histone variants, posttranslational modification of histones (i.e., acetylation, phosphorylation, ubiquitination, and methylation), and nonhistone chromatin-associated proteins that recognize th...