Facultative heterochromatin that changes during cellular differentiation coordinates regulated gene expression, but its assembly is poorly understood. Here, we describe facultative heterochromatin islands in fission yeast and show that their formation at meiotic genes requires factors that eliminate meiotic messenger RNAs (mRNAs) during vegetative growth. Blocking production of meiotic mRNA or loss of RNA elimination factors, including Mmi1 and Red1 proteins, abolishes heterochromatin islands. RNA elimination machinery is enriched at meiotic loci and interacts with Clr4/SUV39h, a methyltransferase involved in heterochromatin assembly. Heterochromatin islands disassemble in response to nutritional signals that induce sexual differentiation. This process involves the antisilencing factor Epe1, the loss of which causes dramatic increase in heterochromatic loci. Our analyses uncover unexpected regulatory roles for mRNA-processing factors that assemble dynamic heterochromatin to modulate gene expression.