Plants contain a great number of genes encoding a distinctive class of SET domain proteins which harbor a plant-specific N-terminal part together with a C-terminal part showing highest sequence similarity to the catalytic domain of the yeast CLR4, the human SUV39H1 and G9a histone-methyltransferases (HMTases). Here we show that NtSET1, a representative member of this class from tobacco, methylated both K9 and K27 of histone H3 in vitro. Ectopic expression of NtSET1, by an inducible promoter, increased the amount of dimethylated H3K9 and induced chromosome-segregation defects in tobacco BY2 cells. Deletion analyses show that the HMTase activity, the association with specific chromatin regions and with condensed chromosomes, and the cellular effects largely depended on the C-terminal region including the SET domain of the protein. Nevertheless, the N-terminal part of NtSET1 was capable of targeting the green fluorescent protein to interphase chromatin. Finally, we show that NtSET1 bound LHP1, the Arabidopsis homolog of animal heterochromatin protein 1 (HP1), and that LHP1 co-localized with heterochromatin containing high amounts of dimethylated H3K9, suggesting a role for NtSET1 in heterochromatic function. Taken together, our results provide new insights into the molecular and global chromatin-binding activities of this particular class member of plant SET domain proteins.