The development of the Drosophila melanogaster wing depends on its subdivision into anterior and posterior compartments, which constitute two independent cell lineages since their origin in the embryonic ectoderm. The anterior-posterior compartment boundary is the place where signaling by the Hedgehog pathway takes place, and this requires pathway activation in anterior cells by ligand expressed exclusively in posterior cells. Several mechanisms ensure the confinement of hedgehog expression to posterior cells, including repression by Cubitus interruptus, the co-repressor Groucho and Master of thick veins. In this work we identified Kismet, a chromodomain-containing protein of the SNF2-like family of ATPases, as a novel component of the hedgehog transcriptional repression mechanism in anterior compartment cells. In kismet mutants, hedgehog is ectopically expressed in a domain of anterior cells close to the anterior-posterior compartment boundary, causing inappropriate activation of the pathway and changes in the development of the central region of the wing. The contribution of Kismet to the silencing of hedgehog expression is limited to anterior cells with low levels of the repressor form of Cubitus interruptus. We also show that knockdown of CHD8, the kismet homolog in Xenopus tropicalis, is also associated with ectopic sonic hedgehog expression and up-regulation of one of its target genes in the eye, Pax2, indicating the evolutionary conservation of Kismet/CHD8 function in negatively controlling hedgehog expression.