Huntington's disease is an autosomal dominant neurodegenerative disorder caused by a CAG expansion mutation in HTT, the gene encoding huntingtin. Evidence from both human genotype-phenotype relationships and mouse model systems suggests that the mutation acts by dysregulating some normal activity of huntingtin. Recent work in the mouse has revealed a role for huntingtin in epigenetic regulation during development. Here, we examine the role of the Drosophila huntingtin ortholog (dhtt) in chromatin regulation in the development of the fly. Although null dhtt mutants display no overt phenotype, we found that dhtt acts as a suppressor of position-effect variegation (PEV), suggesting that it influences chromatin organization. We demonstrate that dhtt affects heterochromatin spreading in a PEV model by modulating histone H3K9 methylation levels at the heterochromatin-euchromatin boundary. To gain mechanistic insights into how dhtt influences chromatin function, we conducted a candidate genetic screen using RNAi lines targeting known PEV modifier genes. We found that dhtt modifies phenotypes caused by knockdown of a number of key epigenetic regulators, including chromatin-associated proteins, histone demethylases (HDMs) and methyltransferases. Notably, dhtt strongly modifies phenotypes resulting from loss of the HDM dLsd1, in both the ovary and wing, and we demonstrate that dhtt appears to act as a facilitator of dLsd1 function in regulating global histone H3K4 methylation levels. These findings suggest that a fundamental aspect of huntingtin function in heterochromatin/euchromatin organization is evolutionarily conserved across phyla.