The interface between cellular systems involving small noncoding RNAs and epigenetic change remains largely unexplored in metazoans. RNA-induced silencing systems have the potential to target particular regions of the genome for epigenetic change by locating specific sequences and recruiting chromatin modifiers. Noting that several genes encoding RNA silencing components have been implicated in epigenetic regulation in Drosophila, we sought a direct link between the RNA silencing system and heterochromatin components. Here we show that PIWI, an ARGONAUTE/PIWI protein family member that binds to Piwi-interacting RNAs (piRNAs), strongly and specifically interacts with heterochromatin protein 1a (HP1a), a central player in heterochromatic gene silencing. The HP1a dimer binds a PxVxL-type motif in the N-terminal domain of PIWI. This motif is required in fruit flies for normal silencing of transgenes embedded in heterochromatin. We also demonstrate that PIWI, like HP1a, is itself a chromatin-associated protein whose distribution in polytene chromosomes overlaps with HP1a and appears to be RNA dependent. These findings implicate a direct interaction between the PIWI-mediated small RNA mechanism and heterochromatin-forming pathways in determining the epigenetic state of the fly genome.[Keywords: PIWI; ARGONAUTE; HP1; heterochromatin; epigenetic; RNAi] Supplemental material is available at http://www.genesdev.org. . In TGS, small RNAs are incorporated into specialized effector complexes able to regulate chromatin modification, resulting in reduced access for the transcriptional machinery to chromatin. The TGS system that contributes to initiation and maintenance of heterochromatin formation in Schizosaccharomyces pombe is particularly well characterized (Verdel and Moazed 2005;Grewal and Jia 2007). In S. pombe, the RNA silencing system targets histone 3 Lys 9 (H3K9) methylation and recruits HP1 homolog Swi6 to the MAT locus and to repetitive elements in pericentric heterochromatin, setting up a heterochromatin spreading/maintenance loop that is dependent on the interaction of Swi6 with the Clr4 histone methyltransferase (HMT) (Grewal and Jia 2007). In plants, a specialized small RNA pathway utilizes heterochromatic RNAs to direct DNA methylation and presumably other chromatin modifications to effect silencing of target loci (for review, see Vaucheret 2007). In Caenorhabditis elegans, a single episode of RNA interference (RNAi) exposure can induce silencing inherited over many generations; mutations that abolish inheritance are all involved in chromatin structure, suggesting a chromatin-based mechanism (Vastenhouw et al. 2006). While the work in fission yeast and plants provides a possible paradigm for RNAi-dependent TGS in metazoans, a specialized TGS effector complex has not yet been characterized in an animal.