At Schizosaccharomyces pombe centromeres, heterochromatin formation is required for de novo incorporation of the histone H3 variant CENP-A(Cnp1), which in turn directs kinetochore assembly and ultimately chromosome segregation during mitosis. Noncoding RNAs (ncRNAs) transcribed by RNA polymerase II (Pol II) directs heterochromatin formation through not only the RNA interference (RNAi) machinery but also RNAi-independent RNA processing factors. Control of centromeric ncRNA transcription is therefore a key factor for proper centromere function. We here demonstrate that Mediator directs ncRNA transcription and regulates centromeric heterochromatin formation in fission yeast. Mediator colocalizes with Pol II at centromeres, and loss of the Mediator subunit Med20 causes a dramatic increase in pericentromeric transcription and desilencing of the core centromere. As a consequence, heterochromatin formation is impaired via both the RNAi-dependent and -independent pathways, resulting in loss of CENP-A(Cnp1) from the core centromere, a defect in kinetochore function, and a severe chromosome segregation defect. Interestingly, the increased centromeric transcription observed in med20Δ cells appears to directly block CENP-A(Cnp1) incorporation since inhibition of Pol II transcription can suppress the observed phenotypes. Our data thus identify Mediator as a crucial regulator of ncRNA transcription at fission yeast centromeres and add another crucial layer of regulation to centromere function.