Chromatin environments differ greatly within a eukaryotic genome, depending on expression state, chromosomal location, and nuclear position. In genomic regions characterized by high repeat content and high gene density, chromatin structure must silence transposable elements but permit expression of embedded genes. We have investigated one such region, chromosome 4 of Drosophila melanogaster. Using chromatin-immunoprecipitation followed by microarray (ChIP-chip) analysis, we examined enrichment patterns of 20 histone modifications and 25 chromosomal proteins in S2 and BG3 cells, as well as the changes in several marks resulting from mutations in key proteins. Active genes on chromosome 4 are distinct from those in euchromatin or pericentric heterochromatin: while there is a depletion of silencing marks at the transcription start sites (TSSs), HP1a and H3K9me3, but not H3K9me2, are enriched strongly over gene bodies. Intriguingly, genes on chromosome 4 are less frequently associated with paused polymerase. However, when the chromatin is altered by depleting HP1a or POF, the RNA pol II enrichment patterns of many chromosome 4 genes shift, showing a significant decrease over gene bodies but not at TSSs, accompanied by lower expression of those genes. Chromosome 4 genes have a low incidence of TRL/GAGA factor binding sites and a low T(m) downstream of the TSS, characteristics that could contribute to a low incidence of RNA polymerase pausing. Our data also indicate that EGG and POF jointly regulate H3K9 methylation and promote HP1a binding over gene bodies, while HP1a targeting and H3K9 methylation are maintained at the repeats by an independent mechanism. The HP1a-enriched, POF-associated chromatin structure over the gene bodies may represent one type of adaptation for genes embedded in repetitive DNA.