Heterochromatin protein 1 (HP1) is a positive regulator of active transcription in euchromatin. HP1 was first identified in Drosophila melanogaster as a major component of heterochromatin. Most eukaryotes have at least three isoforms of HP1, which are conserved in overall structure but localize differentially to heterochromatin and euchromatin. Although initial studies revealed a key role for HP1 in heterochromatin formation and gene silencing, recent progress has shed light on additional roles for HP1 in processes such as euchromatic gene expression. Recent studies have highlighted the importance of HP1-mediated gene regulation in euchromatin. Here, we focus on recent advances in understanding the role of HP1 in active transcription in euchromatin and how modification and localization of HP1 can regulate distinct functions for this protein in different contexts.