The cohesin complex, discovered through its role in sister chromatid cohesion, also plays roles in gene expression and development in organisms from yeast to human. This review highlights what has been learned about the gene control and developmental functions of cohesin and the Nipped-B (NIPBL/Scc2) cohesin loading factor in Drosophila. The Drosophila studies have provided unique insights into the aetiology of Cornelia de Lange syndrome (CdLS), which is caused by mutations affecting sister chromatid cohesion proteins in humans. In vivo experiments with Drosophila show that cohesin and Nipped-B have dosage-sensitive effects on the functions of many evolutionarily conserved genes and developmental pathways. Genome-wide studies with Drosophila cultured cells show that Nipped-B and cohesin co-localize on chromosomes, and bind preferentially, but not exclusively, to many actively transcribed genes and their regulatory sequences, including many of the proposed in vivo target genes. In contrast, the cohesion factors are largely excluded from genes silenced by Polycomb group (PcG) proteins. Combined, the in vivo genetic data and the binding patterns of cohesin and Nipped-B in cultured cells are consistent with the hypothesis that they control the action of gene regulatory sequences, including transcriptional enhancers and insulators, and suggest that they might also help define active chromatin domains and influence transcriptional elongation.