The conserved heterochromatic location of centromeres in higher eukaryotes suggests that intrinsic properties of heterochromatin are important for chromosome inheritance. Based on this hypothesis, mutations in Drosophila melanogaster that alter heterochromatin-induced gene silencing were tested for effects on chromosome inheritance. Here we describe the characterization of theSu(var)2-10 locus, initially identified as aSuppressor of Position-Effect Variegation.Su(var)2-10 is required for viability, and mutations cause both minichromosome and endogenous chromosome inheritance defects. Mitotic chromosomes are improperly condensed in mutants, and polytene chromosomes are structurally abnormal and disorganized in the nucleus.Su(var)2-10 encodes a member of the PIAS protein family, a group of highly conserved proteins that control diverse functions. SU(VAR)2-10 proteins colocalize with nuclear lamin in interphase, and little to no SU(VAR)2-10 is found on condensed mitotic chromosomes. SU(VAR)2-10 is present at some polytene chromosome telomeres, and FISH analyses in mutant polytene nuclei revealed defects in telomere clustering and telomere–nuclear-lamina associations. We propose thatSu(var2-10 controls multiple aspects of chromosome structure and function by establishing/maintaining chromosome organization in interphase nuclei.