Centromeres interact with the spindle apparatus to enable chromosome disjunction and typically contain thousands of tandemly arranged satellite repeats interspersed with retrotransposons. While their role has been obscure, centromeric repeats are epigenetically modified and centromere specification has a strong epigenetic component. In the yeast Schizosaccharomyces pombe, long heterochromatic repeats are transcribed and contribute to centromere function via RNA interference (RNAi). In the higher plant Arabidopsis thaliana, as in mammalian cells, centromeric satellite repeats are short (180 base pairs), are found in thousands of tandem copies, and are methylated. We have found transcripts from both strands of canonical, bulk Arabidopsis repeats. At least one subfamily of 180-base pair repeats is transcribed from only one strand and regulated by RNAi and histone modification. A second subfamily of repeats is also silenced, but silencing is lost on both strands in mutants in the CpG DNA methyltransferase MET1, the histone deacetylase HDA6/SIL1, or the chromatin remodeling ATPase DDM1. This regulation is due to transcription from Athila2 retrotransposons, which integrate in both orientations relative to the repeats, and differs between strains of Arabidopsis. Silencing lost in met1 or hda6 is reestablished in backcrosses to wild-type, but silencing lost in RNAi mutants and ddm1 is not. Twenty-four-nucleotide small interfering RNAs from centromeric repeats are retained in met1 and hda6, but not in ddm1, and may have a role in this epigenetic inheritance. Histone H3 lysine-9 dimethylation is associated with both classes of repeats. We propose roles for transcribed repeats in the epigenetic inheritance and evolution of centromeres.