Eukaryotic genomes are organized into discrete structural and functional chromatin domains. Here, we show that distinct site-specific histone H3 methylation patterns define euchromatic and heterochromatic chromosomal domains within a 47-kilobase region of the mating-type locus in fission yeast. H3 methylated at lysine 9 (H3 Lys⁹), and its interacting Swi6 protein, are strictly localized to a 20-kilobase silent heterochromatic interval. In contrast, H3 methylated at lysine 4 (H3 Lys⁴) is specific to the surrounding euchromatic regions. Two inverted repeats flanking the silent interval serve as boundary elements to mark the borders between heterochromatin and euchromatin. Deletions of these boundary elements lead to spreading of H3 Lys⁹ methylation and Swi6 into neighboring sequences. Furthermore, the H3 Lys⁹methylation and corresponding heterochromatin-associated complexes prevent H3 Lys⁴ methylation in the silent domain.