Transcription by RNA polymerase II (polII) is accompanied by dramatic changes in chromatin structure. Numerous enzymatic activities contribute to these changes, including ATP-dependent nucleosome remodeling enzymes and histone modifying enzymes. Recent studies in budding yeast document a histone modification pathway associated with polII transcription, whereby ubiquitylation of histone H2B leads to methylation of histone H3 on specific lysine residues. Although this series of events appears to be highly conserved among eukaryotes, its mechanistic function in transcription is unknown. Here we document a significant functional divergence between ubiquitylation of H2B and methylation of Lys 4 on histone H3 in the fission yeast Schizosaccharomyces pombe. Loss of H2B ubiquitylation results in defects in cell growth, septation, and nuclear structure, phenotypes not observed in cells lacking H3 Lys 4 methylation. Consistent with these results, gene expression microarray analysis reveals a greater role for H2B ubiquitylation in gene regulation than for H3 Lys 4 methylation. Chromatin immunoprecipitation (ChIP) experiments demonstrate that loss of H2B ubiquitylation alters the distribution of polII and histones in gene coding regions. We propose that ubiquitylation of H2B impacts transcription elongation and nuclear architecture through its effects on chromatin dynamics.