Transcriptional repressor proteins play key roles in the control of gene expression in development. For the Drosophila embryo, the following two functional classes of repressors have been described: short-range repressors such as Knirps that locally inhibit the activity of enhancers and long-range repressors such as Hairy that can dominantly inhibit distal elements. Several long-range repressors interact with Groucho, a conserved corepressor that is homologous to mammalian TLE proteins. Groucho interacts with histone deacetylases and histone proteins, suggesting that it may effect repression by means of chromatin modification; however, it is not known how long-range effects are mediated. Using embryo chromatin immunoprecipitation, we have analyzed a Hairy-repressible gene in the embryo during activation and repression. When inactivated, repressors, activators, and coactivators cooccupy the promoter, suggesting that repression is not accomplished by the displacement of activators or coactivators. Strikingly, the Groucho corepressor is found to be recruited to the transcribed region of the gene, contacting a region of several kilobases, concomitant with a loss of histone H3 and H4 acetylation. Groucho has been shown to form higher-order complexes in vitro; thus, our observations suggest that long-range effects may be mediated by a "spreading" mechanism, modifying chromatin over extensive regions to inhibit transcription.