We have defined the in vivo heterochromatin structure of the left telomere of Saccharomyces cerevisiae chromosome III (LIII). Analysis of heterochromatin of a single telomere was so far lacking, due to the difficulties intrinsic to the highly repetitive nature of telomeric sequences. In LIII, the terminal (C1-3A)n repetitive sequences are followed by a complete X element and by the single copy Ty5-1 retrotransposon. Both the telosome and the X element exhibit overall resistance to micrococcal nuclease digestion reflecting their tight chromatin structure organization. The X element contains protein complexes and irregularly distributed but well localized nucleosomes. In contrast, a regular array of phased nucleosomes is associated with the promoter region of Ty5-1 and with the more centromere-proximal sequences. The lack of a structural component of yeast telomeres, the SIR3 protein, does not alter the overall tight organization of the X element but causes a nucleosome rearrangement within the promoter region of Ty5-1 and releases Ty5-1 silencing. Thus, Sir3p links the modification of the heterochromatin structure with loss of transcriptional silencing.