Eukaryotic genomes can be organized into distinct domains of heterochromatin or euchromatin. In the fission yeast Schizosaccharomyces pombe, assembly of heterochromatin at the silent mating-type region is critical for cell fate determination in the form of mating-type switching. Here, we report that the ubiquitin ligase, Msc1, is a critical factor required for proper cell fate determination in S. pombe. In the absence of Msc1, the in vivo mobility of Swi6 at heterochromatic foci is compromised, and centromere heterochromatin becomes hyperenriched with the heterochromatin binding protein Swi6/HP1. However, at the mating-type locus, Swi6 recruitment is defective in the absence of Msc1. Therefore, Msc1 links maintaining dynamic heterochromatin with proper heterochromatin assembly and cell fate determination. These findings have implications for understanding mechanisms of differentiation in other organisms.