The histone chaperones CAF-1 and Rtt106p are required for heterochromatin silencing in the yeast Saccharomyces cerevisiae. Although it has been suggested that CAF-1 is involved in the maintenance of heterochromatin silencing, their exact functions during this process are not well understood. Here, we show that CAF-1 and Rtt106p are involved in the early stages of heterochromatin formation. The binding of Sir proteins to telomeric heterochromatin is significantly reduced and, additionally, Sir proteins are mislocalized in cells lacking CAF-1 and Rtt106p. At the HMR locus, CAF-1 and Rtt106p are required for the initial recruitment of Sir2p and Sir3p, but not Sir4p, to the HMR-E silencer, where silencing initiates, as well as the efficient spreading of all of these Sir proteins to the distal a1 gene. Moreover, silencing at the HMR locus is dramatically reduced in cells lacking CAF-1, Rtt106p, and Sir1p. Thus, these studies reveal a novel role for CAF-1 and Rtt106p in epigenetic silencing and indicate that the spreading of heterochromatin, a poorly understood process, requires histone chaperones.