Transcriptional repressor proteins play key roles in the control of gene expression in development. For the Drosophila embryo, the following two functional classes of repressors have been described: short-range repressors such as Knirps that locally inhibit the activity of enhancers and long-range repressors such as Hairy that can dominantly inhibit distal elements. Several long-range repressors interact with Groucho, a conserved corepressor that is homologous to mammalian TLE proteins. Groucho interacts with histone deacetylases and histone proteins, suggesting that it may effect repression by means of chromatin modification; however, it is not known how long-range effects are mediated. Using embryo chromatin immunoprecipitation, we have analyzed a Hairy-repressible gene in the embryo during activation and repression. When inactivated, repressors, activators, and coactivators cooccupy the promoter, suggesting that repression is not accomplished by the displacement of activators or coactivators. Strikingly, the Groucho corepressor is found to be recruited to the transcribed region of the gene, contacting a region of several kilobases, concomitant with a loss of histone H3 and H4 acetylation. Groucho has been shown to form higher-order complexes in vitro; thus, our observations suggest that long-range effects may be mediated by a "spreading" mechanism, modifying chromatin over extensive regions to inhibit transcription.Transcriptional repression plays central roles in developmental gene regulation, providing the temporal and spatial specificity required for complex expression patterns. In Drosophila melanogaster, the Hairy transcriptional repressor directs the patterning of segmental pair-rule stripes in the blastoderm embryo and in later stages directs neuronal differentiation (22,41,36,51). Hairy and related transcription factors belong to a conserved metazoan family of Hairy Enhancer of Split (HES) proteins involved in cell fate decisions in neurogenesis, vascular development, mesoderm segmentation, and myogenesis (8,12). Understanding the molecular basis by which these proteins exert their functions will shed light on the transcriptional regulatory mechanism of multiple developmental processes.An important functional distinction between different repressors is their ability to interfere with proximally or distally located activators. In Drosophila, Hairy can inhibit the activities of activators located over 1 kbp away, leading to its characterization as a long-range repressor (3). In contrast, shortrange repressors are limited to interfering with activators bound within ϳ100 bp (16). The limited range of short-range repressors appears to be well adapted to the architectures of the regulatory regions that they control. In the Drosophila embryo, short-range repressors, such as Knirps and Giant, repress the modular enhancers controlling pair-rule genes, such as even-skipped and hairy. The independent activity of such enhancers is guaranteed by the local action of the repressors; if enhancers are brought into art...