To explore the mechanism by which enhancers maintain gene expression, we have assessed the ability of an enhancer and derivative mutants to influence silencing and nuclear location of a transgene. Using site-specific recombination to place different constructs at the same integration sites, we find that disruption of core enhancer motifs impairs the enhancer's ability to suppress silencing. FISH analysis reveals that active transgenes linked to a functional enhancer localize away from centromeres. However, enhancer mutations that result in increased rates of transgene silencing fail to localize the transgene away from centromeric heterochromatin, even when the transgene is in an active state. These mutations thus dissociate transcriptional activity and subnuclear location. Together, our results suggest that the functional enhancer antagonizes gene silencing by preventing localization of a gene near centromeric heterochromatin.