Protein ADP ribosylation catalyzed by cellular poly(ADP-ribose) polymerases (PARPs) and tankyrases modulates chromatin structure, telomere elongation, DNA repair, and the transcription of genes involved in stress resistance, hormone responses, and immunity. Using Drosophila genetic tools, we characterize the expression and function of poly(ADP-ribose) glycohydrolase (PARG), the primary enzyme responsible for degrading protein-bound ADP-ribose moieties. Strongly increasing or decreasing PARG levels mimics the effects of Parp mutation, supporting PARG's postulated roles in vivo both in removing ADP-ribose adducts and in facilitating multiple activity cycles by individual PARP molecules. PARP is largely absent from euchromatin in PARG mutants, but accumulates in large nuclear bodies that may be involved in protein recycling. Reducing the level of either PARG or the silencing protein SIR2 weakens copia transcriptional repression. In the absence of PARG, SIR2 is mislocalized and hypermodified. We propose that PARP and PARG promote chromatin silencing at least in part by regulating the localization and function of SIR2 and possibly other nuclear proteins.