Polytene chromosome structure is a characteristic of some polyploid cells where several to thousands of chromatids are closely associated with perfect alignment of homologous DNA sequences. Here, we show that Drosophila condensin II promotes disassembly of polytene structure into chromosomal components. Condensin II also negatively regulates transvection, a process whereby certain alleles are influenced transcriptionally via interallelic physical associations. We propose that condensin II restricts trans-chromosomal interactions that affect transcription through its ability to spatially separate aligned interphase chromosomes.