The cohesin complex mediates sister chromatid cohesion and regulates gene transcription. Prior studies show that cohesin preferentially binds and regulates genes that control growth and differentiation and that even mild disruption of cohesin function alters development. Here we investigate how cohesin specifically recognizes and regulates genes that control development in Drosophila.Genome-wide analyses show that cohesin selectively binds genes in which RNA polymerase II (Pol II) pauses just downstream of the transcription start site. These genes often have GAGA factor (GAF) binding sites 100 base pairs (bp) upstream of the start site, and GT dinucleotide repeats 50 to 800 bp downstream in the plus strand. They have low levels of histone H3 lysine 36 trimethylation (H3K36me3) associated with transcriptional elongation, even when highly transcribed. Cohesin depletion does not reduce polymerase pausing, in contrast to depletion of the NELF (negative elongation factor) pausing complex. Cohesin, NELF, and Spt5 pausing and elongation factor knockdown experiments indicate that cohesin does not inhibit binding of polymerase to promoters or physically block transcriptional elongation, but at genes that it strongly represses, it hinders transition of paused polymerase to elongation at a step distinct from those controlled by Spt5 and NELF.Our findings argue that cohesin and pausing factors are recruited independently to the same genes, perhaps by GAF and the GT repeats, and that their combined action determines the level of actively elongating RNA polymerase.