Two specific chromosome-targeting and gene regulatory systems are present in Drosophila melanogaster. The male X chromosome is targeted by the male-specific lethal complex believed to mediate the 2-fold up-regulation of the X-linked genes, and the highly heterochromatic fourth chromosome is specifically targeted by the Painting of Fourth (POF) protein, which, together with heterochromatin protein 1 (HP1), modulates the expression level of genes on the fourth chromosome. Here we use chromatin immunoprecipitation and tiling microarray analysis to map POF and HP1 on the fourth chromosome in S2 cells and salivary glands at high resolution. The enrichment profiles were complemented by transcript profiles to examine the link between binding and transcripts. The results show that POF specifically binds to genes, with a strong preference for exons, and the HP1 binding profile is a mirror image of POF, although HP1 displays an additional "peak" in the promoter regions of bound genes. HP1 binding within genes is much higher than the basal HP1 enrichment on Chromosome 4. Our results suggest a balancing mechanism for the regulation of the fourth chromosome where POF and HP1 competitively bind at increasing levels with increased transcriptional activity. In addition, our results contradict transposable elements as a major nucleation site for HP1 on the fourth chromosome.