PARP-1 is the most abundantly expressed member of a family of proteins that catalyze the transfer of ADP-ribose units from NAD+ to target proteins. Herein, we describe previously uncharacterized nucleosome binding properties of PARP-1 that promote the formation of compact, transcriptionally repressed chromatin structures. PARP-1 binds in a specific manner to nucleosomes and modulates chromatin structure through NAD+-dependent automodification, without modifying core histones or promoting the disassembly of nucleosomes. The automodification activity of PARP-1 is potently stimulated by nucleosomes, causing the release of PARP-1 from chromatin. The NAD+-dependent activities of PARP-1 are reversed by PARG, a poly(ADP-ribose) glycohydrolase, and are inhibited by ATP. In vivo, PARP-1 incorporation is associated with transcriptionally repressed chromatin domains that are spatially distinct from both histone H1-repressed domains and actively transcribed regions. Thus, PARP-1 functions both as a structural component of chromatin and a modulator of chromatin structure through its intrinsic enzymatic activity.