The polytene chromosomes of Drosophila melanogaster consist of condensed heterochromatin regions most of which are in the chromocenter, telomeres, and the fourth chromosome. Whereas suppressor of variegation 3-9 [SU(VAR)3-9], a histone methyltransferase, is mainly responsible for lysine 9 of histone H3 (H3K9) methylation of the chromocenter and consequent binding of the heterochromatin-protein HP1, the enzyme for painting of the fourth chromosome by H3K9 methylation has been elusive. We show here that dSETDB1, the Drosophila ortholog of the mammalian SETDB1, is an authentic H3K9 methyltransferase and a pleiotropic regulator of the fly's development. Drosophila mutants hypomorphic or null in dSETDB1 expression lose most of the H3K9 methylation as well as HP1-binding on the fourth chromosome. We also show that binding of painting of fourth (POF), a known fourth chromosome-specific protein, and the dSETDB1-controlled H3K9 methylation of this chromosome are interdependent. Furthermore, POF and dSETDB1 interact with each other in vivo. The deregulation of H3K9 methylation, HP1-binding, and POF-binding resulted in, on the average, a global reduction of gene expression from the fourth chromosome but not the other chromosomes. Deficiency of dSETDB1 also up-regulated the expression of HP1. These results have suggested an interactive network, as controlled in part by dSETDB1, regulating the epigenetic modification and gene expression of Drosophila chromosome 4.