Eukaryotic chromosomes contain compartments of various functions, which are marked by and enriched with specific histone modifications. However, the molecular mechanisms by which these histone marks function in chromosome compartmentalization are poorly understood. Constitutive heterochromatin is a largely silent chromosome compartment characterized in part by H3K9me2 and 3. Here, we show that heterochromatin protein 1 (HP1), an H3K9me2 and 3 “reader,” interacts with SUV39H1, an H3K9me2 and 3 “writer,” and with TRIM28, an abundant HP1 scaffolding protein, to form complexes with increased multivalent engagement of H3K9me2 and 3-modified chromatin. H3K9me2 and 3-marked nucleosomal arrays and associated complexes undergo phase separation to form macromolecule-enriched liquid droplets. The droplets are reminiscent of heterochromatin as they are highly dense chromatin-containing structures that are resistant to DNase and exclude the general transcription factor TFIIB. Our data suggest a general mechanism by which histone marks regulate chromosome compartmentalization by promoting phase separation. Display omitted •HP1, SUV39H1, and TRIM28 constitute heterochromatic H3K9me3 recognition complexes•These complexes contain multiple H3K9me3 reader chromodomains•Multivalent H3K9me3-chromodomain engagement triggers liquid-liquid phase separation•Histone modifications regulate chromatin compartmentalization via phase separation H3K9 methylation marks constitutive heterochromatin in eukaryotes. Wang et al. demonstrate that multivalent engagement of H3K9me3 by its recognition complexes drives liquid-liquid phase separation, through which constitutive heterochromatin is compartmentalized.