The posttranslational addition of palmitate to cysteines occurs ubiquitously in eukaryotic cells, where it functions in anchoring target proteins to membranes and in vesicular trafficking. Here we show that theSaccharomyces cerevisiaepalmitoyltransferase Pfa4 enhanced heterochromatin formation at the cryptic mating-type lociHMRandHMLvia Rif1, a telomere regulatory protein. Acylated Rif1 was detected in extracts from wild-type but notpfa4Δmutant cells. In apfa4Δmutant, Rif1-GFP dispersed away from foci positioned at the nuclear periphery into the nucleoplasm. Sir3-GFP distribution was also perturbed, indicating a change in the nuclear dynamics of heterochromatin proteins. Genetic analyses indicated thatPFA4functioned upstream ofRIF1. Surprisingly, thepfa4Δmutation had only mild effects on telomeric regulation, suggesting Rif1's roles atHMloci and telomeres were more complexly related than previously thought. These data supported a model in which Pfa4-dependent palmitoylation of Rif1 anchored it to the inner nuclear membrane, influencing its role in heterochromatin dynamics.