Locus control regions (LCRs) are gene regulatory elements in mammals that can overcome the highly repressive effects normally associated with heterochromatic transgene locations (for example the centromere) in mice. Deletion of essential LCR sequences renders the cognate gene susceptible to this form of repression, so a proportion of the cells from transgenic mice that would normally express the transgene are silenced-a phenomenon known as position effect variegation (PEV). We show here that PEV can also occur when the transgene is non-centromeric and that the extent of variegation can be developmentally regulated. Furthermore, by overexpressing a mammalian homologue (M31) of Drosophila melanogaster heterochromatin protein 1 (HP1; refs 7,8) in transgenic mouse lines that exhibit PEV, it is possible to modify the proportion of cells that silence the transgene in a dose-dependent manner. Thus, we show M31 overexpression to have two contrasting effects which are dependent on chromosomal context: (i) it enhanced PEV in those lines with centromeric or pericentromeric transgene locations; and (ii) it suppressed PEV when the transgene was non-centromeric. Our results indicate that components or modifiers of heterochromatin may have a chromosomal-context-dependent role in gene silencing and activation decisions in mammals.