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The X-chromosome gene regulatory process called dosage compensation ensures that males (1X) and females (2X) express equal levels of X-chromosome transcripts. The mechanism in Caenorhabditis elegans has been elusive due to improperly annotated transcription start sites (TSSs). Here we define TSSs and the distribution of transcriptionally engaged RNA polymerase II (Pol II) genome-wide in wild-type and dosage-compensation-defective animals to dissect this regulatory mechanism. Our TSS-mapping strategy integrates GRO-seq, which tracks nascent transcription, with a new derivative of this method, called GRO-cap, which recovers nascent RNAs with 5' caps prior to their removal by co-transcriptional processing. Our analyses reveal that promoter-proximal pausing is rare, unlike in other metazoans, and promoters are unexpectedly far upstream from the 5' ends of mature mRNAs. We find that C. elegans equalizes X-chromosome expression between the sexes, to a level equivalent to autosomes, by reducing Pol II recruitment to promoters of hermaphrodite X-linked genes using a chromosome-restructuring condensin complex. DOI:http://dx.doi.org/10.7554/eLife.00808.001.