In Drosophila the Polycomb group (Pc-G) proteins are responsible for the stable and heritable silencing of genes. The Pc-G apparently uses heterochromatin-like mechanisms to transcriptionally inactivate developmental regulators such as the homeotic genes. The Polycomb (Pc) protein is part of a large multimeric complex composed of other members of the Pc-G. We have identified functionally relevant domains of the Pc protein by sequencing different Pc alleles. Additionally, using a Pc-beta gal fusion protein with deleted internal histidine repeats, we found that this mutant protein cannot bind to four particular target loci, but otherwise does not change the remaining overall binding pattern. We show that, in contrast to the dotted subnuclear localization of the wild-type protein, the nuclear distribution of mutant proteins becomes homogeneous. Surprisingly, in Pc mutants the polyhomeotic protein, another member of the Pc-G, is also redistributed in the nucleus. Our results indicate that the appropriate subnuclear localization of the two proteins is critical for the silencing function of the Pc-G complex.