Silent information regulator (Sir) 2 is a limiting component of the Sir2/3/4 complex, which represses transcription at subtelomeric and HM loci. Sir2p also acts independently of Sir3p and Sir4p to influence chromatin organization in the rDNA locus. Deleted and mutated forms of Sir2p have been tested for their ability to complement and/or to disrupt silencing. The highly conserved C-terminal domain of Sir2p (aa 199-562) is insufficient to restore repression at either telomeric or rDNA reporters in a sir2Delta background and fails to nucleate silencing when targeted to an appropriate reporter gene. However, its expression in an otherwise wild-type strain disrupts telomeric repression. Similarly, a point mutation (P394L) within this conserved core inactivates the full-length protein but renders it dominant negative for all types of silencing. Deletion of aa 1-198 from Sir2(394L) eliminates its dominant negative effect. Thus we define two distinct functional domains in Sir2p, both essential for telomeric and rDNA repression: the conserved core domain found within aa 199-562 and a second domain that encompasses aa 94-198. Immunolocalization and two-hybrid studies show that aa 94-198 are required for the binding of Sir2p to Sir4p and for the targeting of Sir2p to the nucleolus through another ligand. The globular core domain provides an essential silencing function distinct from that of targeting or Sir complex formation that may reflect its reported mono-ADP-ribosyl transferase activity.