Condensins are evolutionarily conserved protein complexes that are required for chromosome segregation during cell division and genome organization during interphase. In C. elegans, a specialized condensin, which forms the core of the dosage compensation complex (DCC) binds to and represses X chromosome transcription. Here, we analyzed DCC localization and effect of DCC depletion and binding on histone modifications, transcription factor binding, and gene expression using ChIP-seq and mRNA-seq. Across the X, DCC binding coincides with gene regulatory sites at active chromatin and not heterochromatin. DCC is required for reducing the levels of active histone modifications, including H3K4me3 and H3K27ac, but not repressive modification H3K9me3 on the X. In X-to-autosome fusion chromosomes, DCC spreading into the autosomal sequences locally reduces the level of H3K4me3 and gene expression. Together, our results suggest that DCC fine-tunes X chromosomal transcription by binding to and modulating the activity of gene regulatory elements through reducing activating histone modifications.