The abnormal oocyte (abo) gene of Drosophila melanogaster is a peculiar maternal effect gene whose mutations cause a maternal-effect lethality that can be rescued by specific regions of heterochromatin during early embryogenesis. Here we show that abo encodes an evolutionary conserved chromosomal protein that localizes exclusively to the histone gene cluster and binds to the regulatory regions of such genes. We also show a significant increase of histone transcripts in eggs of abo mutant mothers and a partial rescue of the abo maternal-effect defect by deficiencies of the histone gene cluster. On the basis of these results, we suggest that the Abo protein functions specifically as a negative regulator of histone transcription and propose a molecular model to account for the ability of heterochromatin to partially rescue the abo maternal-effect defect. Our model proposes that increased doses of specific heterochromatic regions titrate out abnormally high levels of histones present in embryos from mutant abo mothers and that a balanced pool of histones is critical for normal embryogenesis in Drosophila.