Methylation of histone H3 on lysine 9 is critical for diverse biological processes including transcriptional repression, heterochromatin formation, and X inactivation. The biological effects of histone methylation are thought to be mediated by effector proteins that recognize and bind to specific patterns of methylation. Using an unbiased in vitro biochemical approach, we have identified ICBP90, a transcription and cell cycle regulator, as a novel methyl K9 H3-specific binding protein. ICBP90 and its murine homologue Np95 are enriched in pericentric heterochromatin of interphase nuclei, and this localization is dependent on H3K9 methylation. Specific binding of ICBP90 to methyl K9 H3 depends on two functional domains, a PHD (plant homeodomain) finger that defines the binding specificity and an SRA (SET- and RING-associated) domain that promotes binding activity. Furthermore, we present evidence that ICBP90 is required for proper heterochromatin formation in mammalian cells.