Silencing at the rDNA, HM loci, and telomeres in Saccharomyces cerevisiae requires histone-modifying enzymes to create chromatin domains that are refractory to recombination and RNA polymerase II transcription machineries. To explore how the silencing factor Sir2 regulates the composition and function of chromatin at the rDNA, the association of histones and RNA polymerase II with the rDNA was measured by chromatin immunoprecipitation. We found that Sir2 regulates not only the levels of K4-methylated histone H3 at the rDNA but also the levels of total histone H3 and RNA polymerase II. Furthermore, our results demonstrate that the ability of Sir2 to limit methylated histones at the rDNA requires its deacetylase activity. In sir2Delta cells, high levels of K4-trimethylated H3 at the rDNA nontranscribed spacer are associated with the expression of transcription units in the nontranscribed spacer by RNA polymerase II and with previously undetected alterations in chromatin structure. Together, these data suggest a model where the deacetylase activity of Sir2 prevents euchromatinization of the rDNA and silences naturally occurring intergenic transcription units whose expression has been associated with disruption of cohesion complexes and repeat amplification at the rDNA.