Heterochromatin protein 1 (HP1), a gene silencing protein, localizes to centric heterochromatin through an interaction with methylated K9 of histone H3, a modification generated by the histone methyl transferase SU(VAR)3-9. On Drosophila polytene chromosomes, HP1 also localizes to 200 sites scattered throughout euchromatin. To address the role of HP1 in euchromatic gene regulation, mRNAs from wild-type and Su(var)2-5 mutants lacking HP1 were compared. Genes residing within a 550-kb genomic region enriched in HP1 that show altered expression in the Su(var)2-5 mutant were analyzed in detail. Three genes within this region, Pros35, CG5676, and cdc2, were found to associate with HP1 by chromatin immunoprecipitation. Surprisingly, these genes require HP1 for expression, suggesting a positive role for HP1 in euchromatic gene expression. Of these genes, only cdc2 is packaged with methylated K9 H3. Furthermore, none of the genes show altered expression in a Su(var)3-9 mutant. Collectively, these data demonstrate multiple mechanisms for HP1 localization within euchromatin and show that some genes associated with HP1 are not affected by alterations in Su(var)3-9 dosage.