The SIN4 and RGR1 genes of Saccharomyces cerevisiae were identified by mutations in quite different genetic screens. We have shown that the SIN4 gene product is required for proper transcriptional regulation of many genes and that a sin4 mutation can affect either activation or repression of specific genes. We have suggested that this dual nature of SIN4 in transcriptional regulation is due to its involvement in chromatin organization. We now report that the role of RGR1 in gene regulation is similar to that of SIN4. SIN4 and RGR1 both function as negative transcriptional regulators of HO and IME1, and mutations in either gene lead to decreased expression of other genes including CTS1. Strains with sin4 or rgr1 mutations both have phenotypes similar to those caused by histone mutations, including suppression of delta insertion into promoters (Spt- phenotype), activation of promoters lacking UAS elements, and decreased superhelical density of plasmid DNA molecules. Overexpression of RGR1 suppresses the temperature sensitivity due to a sin4 mutation. Finally, we use yeast strains expressing GST fusion proteins to demonstrate that the Sin4p and Rgr1p proteins are physically associated in vivo. These results indicate that Sin4p and Rgr1p act together in vivo to organize chromatin structure and thus regulate transcription.