Variegated phenotypes often result from chromosomal rearrangements that place euchromatic genes next to heterochromatin. In such rearrangements, the condensed structure of heterochromatin can spread into euchromatic regions, which then assume the morphology of heterochromatin and become transcriptionally inactive. In position-effect variegation (PEV) therefore, gene inactivation results from a change in chromatin structure. PEV has been intensively investigated in the fruitfly Drosophila, where the phenomenon allows a genetic dissection of chromatin components. Consequently, many genes have been identified which, when mutated, act as dominant modifiers (suppressors or enhancers) of PEV. Data available already demonstrate that genetic, molecular and developmental analysis of these genes provides an avenue to the identification of regulatory and structural chromatin components, and hence to fundamental aspects of chromosome structure and function.