The Sir3 protein helps form telomeric heterochromatin by interacting with hypoacetylated histone H4 lysine 16 (H4-Lys16). The molecular nature of the heterochromatin boundary is still unknown. Here we show that the MYST-like acetyltransferase Sas2p is required for the acetylation (Ac) of H4-Lys16 in euchromatin. In a sas2Delta strain or a phenocopy Lys16Arg mutant, Sir3p spreads from roughly 3 kb to roughly 15 kb, causing hypoacetylation and repression of adjacent chromatin. We also found that disruption of Sir3p binding in a deacetylase-deficient sir2Delta strain can be suppressed by sas2Delta. These data indicate that opposing effects of Sir2p and Sas2p on acetylation of H4-Lys16 maintain the boundary at telomeric heterochromatin.