Facultative heterochromatin regulates gene expression, but its assembly is poorly understood. Previously, we identified facultative heterochromatin islands in the fission yeast genome and found that RNA elimination machinery promotes island assembly at meiotic genes. Here, we report that Taz1, a component of the telomere protection complex Shelterin, is required to assemble heterochromatin islands at regions corresponding to late replication origins that are sites of double-strand break formation during meiosis. The loss of Taz1 or other Shelterin subunits, including Ccq1 that interacts with Clr4/Suv39h, abolishes heterochromatin at late origins and causes derepression of associated genes. Moreover, the late-origin regulator Rif1 affects heterochromatin at Taz1-dependent islands and subtelomeric regions. We explore the connection between facultative heterochromatin and replication control and show that heterochromatin machinery affects replication timing. These analyses reveal the role of Shelterin in facultative heterochromatin assembly at late origins, which has important implications for genome stability and gene regulation.