The nuclear organization of tightly condensed heterochromatin plays important roles in regulating gene transcription and genome integrity. Heterochromatic domains are usually present at chromosomal regions containing a large array of repeated DNA sequences. We previously showed that integration of a 1,000-copy tandem array of an inducible reporter gene into the genome of mammalian cells induces the formation of a highly compact heterochromatic domain enriched in heterochromatin protein 1 (HP1). It remains to be determined how these DNA repeats are packaged into a heterochromatic form and are silenced. Here, we show that HP1-mediated transgene condensation and silencing require the interaction with PxVxL motif-containing proteins. The chromatin assembly factor 1 (CAF-1) complex concentrates at the transgenic locus through the interaction of its PxVxL motif-containing p150 subunit with HP1. Knockdown of p150 relieves HP1-mediated transgene compaction and repression. When targeted to the transgenic locus, p150 mutants defective in binding HP1 cause transgene decondensation and activation. Taken together, these results suggest that HP1 cooperates with CAF-1 to compact transgene repeats. This study provides important insight into how heterochromatin is maintained at chromosomal regions with abundant DNA repeats.