Su (var) 3–9 is a dominant modifier of heterochromatin‐induced gene silencing. Like its mammalian and Schizosaccharomyces pombe homologues, Su (var) 3–9 encodes a histone methyltransferase (HMTase), which selectively methylates histone H3 at lysine 9 (H3‐K9). In Su (var) 3–9 null mutants, H3‐K9 methylation at chromocentre heterochromatin is strongly reduced, indicating that SU (VAR) 3–9 is the major heterochromatin‐specific HMTase in Drosophila. SU (VAR) 3–9 interacts with the heterochromatin‐associated HP1 protein and with another silencing factor, SU (VAR) 3–7. Notably, SU (VAR) 3–9–HP1 interaction is interdependent and governs distinct localization patterns of both proteins. In Su (var) 3–9 null mutants, concentration of HP1 at the chromocentre is nearly lost without affecting HP1 accumulation at the fourth chromosome. By contrast, in HP1 null mutants SU (VAR) 3–9 is no longer restricted at heterochromatin but broadly dispersed across the chromosomes. Despite this interdependence, Su (var) 3–9 dominates the PEV modifier effects of HP1 and Su (var) 3–7 and is also epistatic to the Y chromosome effect on PEV. Finally, the human SUV39H1 gene is able to partially rescue Su (var) 3–9 silencing defects. Together, these data indicate a central role for the SU (VAR) 3–9 HMTase in heterochromatin‐induced gene silencing in Drosophila.