The Drosophila melanogaster Nipped-B protein facilitates transcriptional activation of the cut and Ultrabithorax genes by remote enhancers. Sequence homologues of Nipped-B, Scc2 of Saccharomyces cerevisiae, and Mis4 of Schizosaccharomyces pombe are required for sister chromatid cohesion during mitosis. The evolutionarily conserved Cohesin protein complex mediates sister chromatid cohesion, and Scc2 and Mis4 are needed for Cohesin to associate with chromosomes. Here, we show that Nipped-B is also required for sister chromatid cohesion but that, opposite to the effect of Nipped-B, the stromalin/Scc3 component of Cohesin inhibits long-range activation of cut. To explain these findings, we propose a model based on the chromatin domain boundary activities of Cohesin in which Nipped-B facilitates cut activation by alleviating Cohesin-mediated blocking of enhancer-promoter communication.