Phosphorylation of the large RNA Polymerase II subunit C-terminal domain (CTD) is believed to be important in promoter clearance and for recruiting protein factors that function in messenger RNA synthesis and processing. P-TEFb is a protein kinase that targets the (CTD). The goal of this study was to identify chromatin modifications and associations that require P-TEFb activity in vivo. We knocked down the catalytic subunit of P-TEFb, Cdk9, in Drosophila melanogaster using RNA interference. Cdk9 knockdown flies die during metamorphosis. Phosphorylation at serine 2 and serine 5 of the CTD heptad repeat were both dramatically reduced in knockdown larvae. Hsp 70 mRNA induction by heat shock was attenuated in Cdk9 knockdown larvae. Both mono- and trimethylation of histone H3 at lysine 4 were dramatically reduced, suggesting a link between CTD phosphorylation and histone methylation in transcribed chromatin in vivo. Levels of the chromo helicase protein CHD1 were reduced in Cdk9 knockdown chromosomes, suggesting that CHD1 is targeted to chromosomes through P-TEFb-dependent histone methylation. Dimethylation of histone H3 at lysine 36 was significantly reduced in knockdown larvae, implicating CTD phosphorylation in the regulation of this chromatin modification. Binding of the RNA Polymerase II elongation factor ELL was reduced in knockdown chromosomes, suggesting that ELL is recruited to active polymerase via CTD phosphorylation.