In C. elegans, an X-chromosome-wide regulatory process compensates for the difference in X-linked gene dose between males (XO) and hermaphrodites (XX) by equalizing levels of X-chromosome transcripts between the sexes. To achieve dosage compensation, a large protein complex is targeted to the X chromosomes of hermaphrodites to reduce their expression by half. This repression complex is also targeted to a single autosomal gene, her-1. By silencing this male-specific gene, the complex induces hermaphrodite sexual development. Our analysis of the atypical dosage compensation gene dpy-21 revealed the first molecular differences in the complex that achieves gene-specific versus chromosome-wide repression. dpy-21 mutations, shown here to be null, cause elevated X-linked gene expression in XX animals, but unlike mutations in other dosage compensation genes, they do not cause extensive XX-specific lethality or disrupt the stability or targeting of the dosage compensation complex to X. Nonetheless, DPY-21 is a member of the dosage compensation complex and localizes to X chromosomes in a hermaphrodite-specific manner. However, DPY-21 is the first member of the dosage compensation complex that does not also associate with her-1. In addition to a difference in the composition of the complex at her-1 versus X, we also found differences in the targeting of the complex to these sites. Within the complex, SDC-2 plays the lead role in recognizing X-chromosome targets, while SDC-3 plays the lead in recognizing her-1 targets.