Two antagonistic groups of genes, the trithorax- and the Polycomb-group, are proposed to maintain the appropriate active or inactive state of homeotic genes set up earlier by transiently expressed segmentation genes. Although some details about the mechanism of maintenance are available, it is still unclear how the initially active or inactive chromatin domains are recognized by either the trithorax-group or the Polycomb-group proteins. We describe an unusual dominant allele of a Polycomb-group gene, Enhancer of zeste, which mimics the phenotype of loss-of-function mutations in trithorax-group genes. This mutation, named E(z)(Trithorax mimic) [E(z)(Trm)], contains a single-amino-acid substitution in the conserved SET domain. The strong dominant trithorax-like phenotypes elicited by this E(z) allele suggest that the mutated arginine-741 plays a critical role in distinguishing between active and inactive chromatin domains of the homeotic gene complexes. We have examined the modification of E(z)(Trm) phenotypes by mutant alleles of PcG and trxG genes and other mutations that alter the phosphorylation of nuclear proteins, covalent modifications of histones, or histone dosage. These data implicate some trxG genes in transcriptional repression as well as activation and provide genetic evidence for involvement of histone modifications in PcG/trxG-dependent transcriptional regulation.