At yeast telomeres and silent mating-type loci, chromatin assumes a higher-order structure that represses transcription by means of the histone deacetylase Sir2 and structural proteins Sir3 and Sir4. Here, we present a fully reconstituted system to analyze SIR holocomplex binding to nucleosomal arrays. Purified Sir2-3-4 heterotrimers bind chromatin, cooperatively yielding a stable complex of homogeneous molecular weight. Remarkably, Sir2-3-4 also binds naked DNA, reflecting the strong, albeit nonspecific, DNA-binding activity of Sir4. The binding of Sir3 to nucleosomes is sensitive to histone H4 N-terminal tail removal, while that of Sir2-4 is not. Dot1-mediated methylation of histone H3K79 reduces the binding of both Sir3 and Sir2-3-4. Additionally, a byproduct of Sir2-mediated NAD hydrolysis, O-acetyl-ADP-ribose, increases the efficiency with which Sir3 and Sir2-3-4 bind nucleosomes. Thus, in small cumulative steps, each Sir protein, unmodified histone domains, and contacts with DNA contribute to the stability of the silent chromatin complex.