Gfi1b is a 37 kDa nuclear protein with six C2H2 zinc-finger domains that can silence transcription upon binding to specific target gene promoters. Here we show by using a chromatin immunoprecipitation and cloning protocol that Gfi1b also binds to gamma-satellite sequences that mainly occur in pericentric heterochromatin. Immuno-FISH experiments demonstrated that Gfi1b is localized at foci of pericentric heterochromatin identified by DAPI staining. Elevated levels of Gfi1b correlated with increased histone H3 lysine 9 dimethylation at sites neighboring gamma-satellite sequences but also at Gfi1b target gene promoters. In Gfi1b-deficient cells, however, a decrease of histone H3 lysine 9 trimethylation and a loss of heterochromatic structures was observed. Strikingly, we found that Gfi1b binds to both SUV39H1 and G9A histone methyl transferases, which provides a direct link between histone methylation and Gfi1b at heterochromatic and euchromatic sites. We propose that Gfi1b functions in heterochromatin formation and silencing of euchromatic transcription by recruiting histone methyl transferases to either gamma-satellite sequences or specific target gene promoters.