Heterochromatin is the gene-poor, satellite-rich eukaryotic genome compartment that supports many essential cellular processes. The functional diversity of proteins that bind and often epigenetically define heterochromatic DNA sequence reflects the diverse functions supported by this enigmatic genome compartment. Moreover, heterogeneous signatures of selection at chromosomal proteins often mirror the heterogeneity of evolutionary forces that act on heterochromatic DNA. To identify new such surrogates for dissecting heterochromatin function and evolution, we conducted a comprehensive phylogenomic analysis of the Heterochromatin Protein 1 gene family across 40 million years of Drosophila evolution. Our study expands this gene family from 5 genes to at least 26 genes, including several uncharacterized genes in Drosophila melanogaster. The 21 newly defined HP1s introduce unprecedented structural diversity, lineage-restriction, and germline-biased expression patterns into the HP1 family. We find little evidence of positive selection at these HP1 genes in both population genetic and molecular evolution analyses. Instead, we find that dynamic evolution occurs via prolific gene gains and losses. Despite this dynamic gene turnover, the number of HP1 genes is relatively constant across species. We propose that karyotype evolution drives at least some HP1 gene turnover. For example, the loss of the male germline-restricted HP1E in the obscura group coincides with one episode of dramatic karyotypic evolution, including the gain of a neo-Y in this lineage. This expanded compendium of ovary- and testis-restricted HP1 genes revealed by our study, together with correlated gain/loss dynamics and chromosome fission/fusion events, will guide functional analyses of novel roles supported by germline chromatin.