The demonstration, over a decade ago, that HP1 is a highly conserved constituent of heterochromatin was accompanied by the explicit view that this protein plays a pivotal role in epigenetic regulation (P.B. Singh, J.R. Miller, J. Pearce, R. Kothary, R.D. Burton, R. Paro, T.C. James, and S.J. Gaunt, 1991, Nucleic Acids Res. 19, 789-794). Recent studies have confirmed this view, unveiling specific interactions of HP1 with a variety of histone and nonhistone proteins. We discuss here some of these observations, concentrating on structure-function relationships and intracellular dynamics. Integrating the available information, we also present a hypothetical model describing how HP1, acting as a bifunctional cross-linker, could organize peripheral heterochromatin and contribute in the compartmentalization of the cell nucleus.