Heterochromatin in eukaryotic genomes regulates diverse chromosomal processes including transcriptional silencing. However, in Schizosaccharomyces pombe RNA polymerase II (RNAPII) transcription of centromeric repeats is essential for RNA-interference-mediated heterochromatin assembly. Here we study heterochromatin dynamics during the cell cycle and its effect on RNAPII transcription. We describe a brief period during the S phase of the cell cycle in which RNAPII preferentially transcribes centromeric repeats. This period is enforced by heterochromatin, which restricts RNAPII accessibility at centromeric repeats for most of the cell cycle. RNAPII transcription during S phase is linked to loading of RNA interference and heterochromatin factors such as the Ago1 subunit of the RITS complex and the Clr4 methyltransferase complex subunit Rik1 (ref. 7). Moreover, Set2, an RNAPII-associated methyltransferase that methylates histone H3 lysine 36 at repeat loci during S phase, acts in a pathway parallel to Clr4 to promote heterochromatin assembly. We also show that phosphorylation of histone H3 serine 10 alters heterochromatin during mitosis, correlating with recruitment of condensin that affects silencing of centromeric repeats. Our analyses suggest at least two distinct modes of heterochromatin targeting to centromeric repeats, whereby RNAPII transcription of repeats and chromodomain proteins bound to methylated histone H3 lysine 9 mediate recruitment of silencing factors. Together, these processes probably facilitate heterochromatin maintenance through successive cell divisions.