Linker histone H1 is among the most abundant components of chromatin. H1 has profound effects on chromosome architecture. H1 also helps to tether DNA- and histone-modifying enzymes to chromatin. Metazoan linker histones have a conserved tripartite structure comprising N-terminal, globular, and long, unstructured C-terminal domains. Here we utilize truncated Drosophila H1 polypeptides in vitro and H1 mutant transgenes in vivo to interrogate the roles of these domains in multiple biochemical and biological activities of H1. We demonstrate that the globular domain and the proximal part of the C-terminal domain are essential for H1 deposition into chromosomes and for the stability of H1-chromatin binding. The two domains are also essential for fly viability and the establishment of a normal polytene chromosome structure. Additionally, through interaction with the heterochromatin-specific histone H3 Lys-9 methyltransferase Su(var)3-9, the H1 C-terminal domain makes important contributions to formation and H3K9 methylation of heterochromatin as well as silencing of transposons in heterochromatin. Surprisingly, the N-terminal domain does not appear to be required for any of these functions. However, it is involved in the formation of a single chromocenter in polytene chromosomes. In summary, we have discovered that linker histone H1, similar to core histones, exerts its multiple biological functions through independent, biochemically separable activities of its individual structural domains.