Heterochromatin in fission yeast is targeted dynamically by opposing chromatin-modifying activities capable of alleviating or promoting transcriptional gene silencing. In this study, we report the biochemical and genetic characterization of a ubiquitin-conjugating enzyme Rhp6 (a homolog of budding yeast Rad6), which has been shown to negatively affect stability of heterochromatic structures. We show that Rhp6 is a component of the multisubunit protein complex (termed HULC) that also contains two RING finger proteins Rfp1 and Rfp2, sharing homology with budding yeast Bre1 protein and a unique serine-rich protein Shf1. HULC is required for ubiquitination of histone H2B at lysine 119 (H2B-K119), and it localizes to heterochromatic sequences. Moreover, our analyses suggest that Rhp6-induced changes in heterochromatic silencing are mediated predominantly through H2B ubiquitination (ubH2B), and they correlate with increased RNA polymerase II levels at repeat elements embedded within heterochromatin domains. Interestingly, heterochromatic derepression caused by Rhp6 occurs independently of the involvement of HULC subunits and ubH2B in methylation of histone H3 at lysine 4 (H3K4me). These analyses implicate ubH2B in modulation of heterochromatin, which has important implications for dynamics and many functions associated with heterochromatic structures.