In this study, we characterize a four-protein nucleosome-binding complex from Schizosaccharomyces pombe, termed SAPHIRE, that includes two orthologs of human Lsd1, a histone demethylase. The SAPHIRE complex is essential for cell viability, whereas saphire mutants lacking key conserved catalytic residues are viable but thermosensitive, suggesting that SAPHIRE has both an important enzymatic function and an essential nonenzymatic function. SAPHIRE is present in (or adjacent to) particular heterochromatic loci and also in the transcription start site regions of many highly active polymerase II genes. However, ribosomal protein genes are notably SAPHIRE deficient. SAPHIRE promotes activation, as target genes are selectively attenuated in saphire mutants. Interestingly, saphire mutants display increased histone H3 lysine 4 dimethylation, a modification typically associated with euchromatin. SAPHIRE localization is dynamic, as activated genes rapidly acquire SAPHIRE. Furthermore, saphire mutants dramatically shift a heterochromatin-euchromatin boundary in Chr1, suggesting a novel role in boundary regulation.Chromatin is a dynamic material that partitions chromosomes into functional domains (telomeres, centromeres, and rRNA gene arrays) and also partitions individual genes into segments, each with a distinct role in transcriptional regulation. All chromatin regions contain arrays of nucleosomes, which consist of 147 base pairs of DNA wrapped around an octameric disk of histone proteins (24, 34). However, different chromatin regions have distinctive characteristics, including (i) differences in chromatin composition, including histone variants, linker histones, and associated nonhistone chromatin architectural proteins; (ii) structural diversity (nucleosome positioning or compaction); and (iii) variation in covalent modifications of the DNA and histones (34).Covalent histone modifications serve as docking sites for protein domains present in specific factors, which in turn endow the region with unique characteristics (46). Methylation of lysines in the unstructured termini (tails) of histones regulates a wide array of DNA-templated processes, including transcription (12, 47). Methylation of lysines in histone tails is mediated by two families of enzymes, namely, the DOT family and the SET family (30,40). These enzymes can mono-, di-, or trimethylate lysines, and even the subtle difference between di-and trimethylation of the same lysine residue can be discriminated by recognition domains and, therefore, used to recruit distinct factors (21,33,52).Dimethylation of histone H3 lysine 4 (H3K4me2) is generally thought to make chromatin permissive to transcription,