In the work reported here we have undertaken a functional dissection of a Polycomb response element (PRE) from the iab-7 cis-regulatory domain of the Drosophila melanogaster bithorax complex (BX-C). Previous studies mapped the iab-7 PRE to an 860-bp fragment located just distal to the Fab-7 boundary. Located within this fragment is an approximately 230-bp chromatin-specific nuclease-hypersensitive region called HS3. We have shown that HS3 is capable of functioning as a Polycomb-dependent silencer in vivo, inducing pairing-dependent silencing of a mini-white reporter. The HS3 sequence contains consensus binding sites for the GAGA factor, a protein implicated in the formation of nucleosome-free regions of chromatin, and Pleiohomeotic (Pho), a Polycomb group protein that is related to the mammalian transcription factor YY1. We show that GAGA and Pho interact with these sequences in vitro and that the consensus binding sites for the two proteins are critical for the silencing activity of the iab-7 PRE in vivo.