It is important to accurately regulate the expression of genes involved in development and environmental response. In the fission yeast Schizosaccharomyces pombe, meiotic genes are tightly repressed during vegetative growth. Despite being embedded in heterochromatin these genes are transcribed and believed to be repressed primarily at the level of RNA. However, the mechanism of facultative heterochromatin formation and the interplay with transcription regulation is not understood. We show genome-wide that HDAC-dependent histone deacetylation is a major determinant in transcriptional silencing of facultative heterochromatin domains. Indeed, mutation of class I/II HDACs leads to increased transcription of meiotic genes and accumulation of their mRNAs. Mechanistic dissection of the pho1 gene where, in response to phosphate, transient facultative heterochromatin is established by overlapping lncRNA transcription shows that the Clr3 HDAC contributes to silencing independently of SHREC, but in an lncRNA-dependent manner. We propose that HDACs promote facultative heterochromatin by establishing alternative transcriptional silencing.