Drosophila melanogaster heterochromatin protein 1a (HP1a) is essential for compacted heterochromatin structure and the associated gene silencing. Its chromo shadow domain (CSD) is well known for binding to peptides that contain a PXVXL motif. Heterochromatin protein 2 (HP2) is a non-histone chromosomal protein that associates with HP1a in the pericentric heterochromatin, telomeres, and the fourth chromosome. Using NMR spectroscopy, fluorescence polarization, and site-directed mutagenesis, we identified an LCVKI motif in HP2 that binds to the HP1a CSD. The binding affinity of the HP2 fragment is approximately two orders of magnitude higher than that of peptides from PIWI (with a PRVKV motif), AF10 (with a PLVVL motif), or CG15356 (with LYPLL and LSIVA motifs). To delineate differential interactions of the HP1a CSD, we characterized its structure, backbone dynamics, and dimerization constant. We found that the dimerization constant is bracketed by the affinities of HP2 and PIWI, which dock to the same HP1a homodimer surface. This suggests that HP2, but not PIWI, interaction can drive the homodimerization of HP1a. Interestingly, the integrity of the disordered C-terminal extension (CTE) of HP1a is essential for discriminatory binding, whereas swapping the PXVXL motifs does not confer specificity. Serine phosphorylation at the peptide binding surface of the CSD is thought to regulate heterochromatin assembly. Glutamic acid substitution at these sites destabilizes HP1a dimers, but improves the interaction with both binding partners. Our studies underscore the importance of CSD dimerization and cooperation with the CTE in forming distinct complexes of HP1a.