Histones undergo post-translational modifications that are linked to important biological processes. Previous studies have indicated that lysine methylation correlating with closed or repressive chromatin is absent in the budding yeast Saccharomyces cerevisiae, including at H4 lysine 20 (K20). Here we provide functional evidence for H4 K20 monomethylation (K20me1) in budding yeast. H4 K20me1 is detectable on endogenous H4 by western analysis using methyl-specific antibodies, and the signal is abrogated by H4 K20 substitutions and by competition with H4 K20me1 peptides. Using chromatin immunoprecipitation, we show that H4 K20me1 levels are highest at heterochromatic locations, including subtelomeres, the silent mating type locus, and rDNA repeats, and lowest at centromeres within euchromatin. Further, an H4 K20A substitution strongly reduced heterochromatic reporter silencing at telomeres and the silent mating type locus and led to an increase in subtelomeric endogenous gene expression. The correlation between the location of H4 K20me1 and the effect of the H4 K20A substitution suggests that this modification plays a repressive function. Our findings reveal the first negative regulatory histone methylation in budding yeast and indicate that H4 K20me1 is evolutionarily conserved from simple to complex eukaryotes.