Controlling the degree of higher order chromatin folding is a key element in partitioning the metazoan genome into functionally distinct chromosomal domains. However, the mechanism of this fundamental process is poorly understood. Our recent studies suggested that the essential histone variant H2A.Z and the silencing protein HP1alpha may function together to establish a specialized conformation at constitutive heterochromatic domains. We demonstrate here that HP1alpha is a unique chromatin binding protein. It prefers to bind to condensed higher order chromatin structures and alters the chromatin-folding pathway in a novel way to locally compact individual chromatin fibers without crosslinking them. Strikingly, both of these features are enhanced by an altered nucleosomal surface created by H2A.Z (the acidic patch). This shows that the surface of the nucleosome can regulate the formation of distinct higher order chromatin structures mediated by an architectural chromatin binding protein.