Heterochromatin formation in yeast involves deacetylation of histones, but the precise relationship between acetylation and the association of proteins such as Sir3, Sir4, and the histone deacetylase Sir2 with chromatin is still unclear. Here we show that Sir3 protein spreads to subtelomeric DNA in cells lacking the transcription-related histone acetyltransferases GCN5 and ELP3. Spreading correlates with hypoacetylation of lysines in the histone H3 tail and results in deacetylation of lysine 16 in histone H4. De-repression of genes situated very close to the ends of the chromosomes in gcn5 elp3 suggests that Sir3 spreads into subtelomeric DNA from the tip of the telomere. Interestingly, growth defects caused by gcn5 elp3 mutation can be suppressed by SIR deletion, suggesting that Sir proteins become detrimental for growth when chromatin is severely hypoacetylated.