Heterochromatin Protein 1 (HP1) is a conserved component of the highly compact chromatin found at centromeres and telomeres. A conserved feature of the protein is multiple phosphorylation. Hyper-phosphorylation of HP1 accompanies the assembly of cytologically distinct heterochromatin during early embryogenesis. Hypo-phosphorylated HP1 is associated with the DNA-binding activities of the origin recognition complex (ORC) and an HMG-like HP1/ORC-Associated Protein (HOAP). Perturbations in HP1 localization in pericentric and telomeric heterochromatin in mutants for Drosophila ORC2 and HOAP, respectively, indicate roles for these HP1 phosphoisoforms in heterochromatin assembly also. To elucidate the roles of hypo- and hyper-phosphophorylated HP1 in heterochromatin assembly, we have mutated consensus Protein Kinase-A phosphorylation sites in the HP1 hinge domain and examined the mutant proteins for distinct in vitro and in vivo activities. Mutations designed to mimic hyper-phosphorylation render the protein incapable of binding HOAP and the DmORC1 subunit but confer enhanced homo-dimerization and lysine 9-methylated histone H3-binding to the protein. Mutations rendering the protein unphosphorylatable, by contrast, do not affect homo-dimerization or binding to lysine 9-di-methylated histone H3, HOAP, or DmORC1 but do confer novel DmORC2-binding activity to the protein. This mutant protein is ectopically localized throughout the chromosomes when overexpressed in vivo in the presence of a full dose of DmORC2. This ectopic targeting is accompanied by ectopic targeting of lysine 9 tri-methylated histone H3. The distinct activities of these mutant proteins could reflect distinct roles for HP1 phosphoisoforms in heterochromatin structure and function.