dREAM co-operates with insulator-binding proteins and regulates expression at divergently paired genes.

dREAM complexes represent the predominant form of E2F/RBF repressor complexes in Drosophila. dREAM associates with thousands of sites in the fly genome but its mechanism of action is unknown. To understand the genomic context in which dREAM acts we examined the distribution and localization of Drosophila E2F and dREAM proteins. Here we report a striking and unexpected overlap between dE2F2/dREAM sites and binding sites for the insulator-binding proteins CP190 and Beaf-32. Genetic assays show that these components functionally co-operate and chromatin immunoprecipitation experiments on mutant animals demonstrate that dE2F2 is important for association of CP190 with chromatin. dE2F2/dREAM binding sites are enriched at divergently transcribed genes, and the majority of genes upregulated by dE2F2 depletion represent the repressed half of a differentially expressed, divergently transcribed pair of genes. Analysis of mutant animals confirms that dREAM and CP190 are similarly required for transcriptional integrity at these gene pairs and suggest that dREAM functions in concert with CP190 to establish boundaries between repressed/activated genes. Consistent with the idea that dREAM co-operates with insulator-binding proteins, genomic regions bound by dREAM possess enhancer-blocking activity that depends on multiple dREAM components. These findings suggest that dREAM functions in the organization of transcriptional domains.