Formation of heterochromatin serves a critical role in organizing the genome and regulating gene expression. In most organisms, heterochromatin flanks centromeres and telomeres. To identify heterochromatic regions in the heavily studied model C. elegans, which possesses holocentric chromosomes with dispersed centromeres, we analyzed the genome-wide distribution of the heterochromatin protein 1 (HP1) ortholog HPL-2 and compared its distribution to other features commonly associated with heterochromatin. HPL-2 binding highly correlates with histone H3 mono- and dimethylated at lysine 9 (H3K9me1 and H3K9me2) and forms broad domains on autosomal arms. Although HPL-2, like other HP1 orthologs, binds H3K9me peptides in vitro, the distribution of HPL-2 in vivo appears relatively normal in mutant embryos that lack H3K9me, demonstrating that the chromosomal distribution of HPL-2 can be achieved in an H3K9me-independent manner. Consistent with HPL-2 serving roles independent of H3K9me, hpl-2 mutant worms display more severe defects than mutant worms lacking H3K9me. HPL-2 binding is enriched for repetitive sequences, and on chromosome arms is anticorrelated with centromeres. At the genic level, HPL-2 preferentially associates with well-expressed genes, and loss of HPL-2 results in up-regulation of some binding targets and down-regulation of others. Our work defines heterochromatin in an important model organism and uncovers both shared and distinctive properties of heterochromatin relative to other systems.