Transcriptionally silent heterochromatin is associated with repetitive DNA. It is poorly understood whether and how heterochromatin differs between different organisms and whether its structure can be remodelled in response to environmental signals. Here, we address this question by analysing the chromatin state associated with DNA repeats in the human fungal pathogen Candida albicans. Our analyses indicate that, contrary to model systems, each type of repetitive element is assembled into a distinct chromatin state. Classical Sir2-dependent hypoacetylated and hypomethylated chromatin is associated with the rDNA locus while telomeric regions are assembled into a weak heterochromatin that is only mildly hypoacetylated and hypomethylated. Major Repeat Sequences, a class of tandem repeats, are assembled into an intermediate chromatin state bearing features of both euchromatin and heterochromatin. Marker gene silencing assays and genome-wide RNA sequencing reveals that C. albicans heterochromatin represses expression of repeat-associated coding and non-coding RNAs. We find that telomeric heterochromatin is dynamic and remodelled upon an environmental change. Weak heterochromatin is associated with telomeres at 30 °C, while robust heterochromatin is assembled over these regions at 39 °C, a temperature mimicking moderate fever in the host. Thus in C. albicans, differential chromatin states controls gene expression and epigenetic plasticity is linked to adaptation.