The extensively studied yeast GAL1-10 gene cluster is tightly regulated by environmental sugar availability. Unexpectedly, under repressive conditions the 31 region of the GAL 10 coding sequence is trimethylated by Set1 on histone H3 K4, normally characteristic of 5' regions of actively transcribed genes. This reflects transcription of a long noncoding R (GAL10-ncRNA) that is reciprocal to GAL1 and GAL10 mRNAs and driven by the DNA-binding protein Reb1. Point mutations in predicted Reb1-binding sites abolished Reb1 binding and ncRNA synthesis. The GAL10-ncRNA is transcribed approximately once every 50 min and targeted for degradation by the TRAMP and exosome complexes, resulting in low steady-state levels (approximately one molecule per 14 cells). GAL10-ncRNA transcription recruits the methyltransferase Set2 and histone deacetylation activities in cis, leading to stable changes in chromatin structure. These chromatin modifications act principally through the Rpd3S complex to aid glucose repression of GAL1-10 at physiologically relevant sugar concentrations.