The organization of chromatin into higher-order structures influences chromosome function and epigenetic gene regulation. Higher-order chromatin has been proposed to be nucleated by the covalent modification of histone tails and the subsequent establishment of chromosomal subdomains by non-histone modifier factors. Here we show that human SUV39H1 and murine Suv39h1--mammalian homologues of Drosophila Su(var)3-9 and of Schizosaccharomyces pombe clr4--encode histone H3-specific methyltransferases that selectively methylate lysine 9 of the amino terminus of histone H3 in vitro. We mapped the catalytic motif to the evolutionarily conserved SET domain, which requires adjacent cysteine-rich regions to confer histone methyltransferase activity. Methylation of lysine 9 interferes with phosphorylation of serine 10, but is also influenced by pre-existing modifications in the amino terminus of H3. In vivo, deregulated SUV39H1 or disrupted Suv39h activity modulate H3 serine 10 phosphorylation in native chromatin and induce aberrant mitotic divisions. Our data reveal a functional interdependence of site-specific H3 tail modifications and suggest a dynamic mechanism for the regulation of higher-order chromatin.