Alu interspersed repetitive elements possess internal RNA polymerase III promoters which are strongly transcribed in vitro, yet these elements are nearly silent in somatic cells. To examine whether repression by chromatin proteins could contribute to the low level of Alu expression, a conserved Alu element from the fourth intron of the human alpha-fetoprotein gene was reconstituted with purified octamer or tetramer particles. Analysis of reconstitutes revealed that this Alu element directed translational and rotational positioning of octamers as well as tetramers. In vitro transcription experiments with reconstituted templates demonstrated that RNA polymerase III-dependent transcription of the Alu element was profoundly repressed by positioned octamer particles. Furthermore, complete CpG methylation of this template enhanced the capacity of tetramers to repress transcription.