Significance In multicellular organisms, a single genome gives rise to a multitude of cell types by enforcing appropriate gene expression patterns. Epigenetic mechanisms involving modification of histones, including tri-methylation of histone H3 lysine 9 (H3K9me3), assemble and propagate repressive heterochromatin to prevent untimely gene expression. Dysregulation of epigenetic gene-silencing mechanisms is a hallmark of a variety of diseases including cancer. However, the requirements for epigenetic transmission of heterochromatin are not well understood. This study reveals the mechanism by which methylated histones provide an epigenetic template for heterochromatin propagation. We discover that a critical threshold of H3K9me3 is required for effective chromatin-association of the histone methyltransferase, which binds to and catalyzes additional H3K9me to propagate heterochromatin and enforce stable gene silencing., Heterochromatin assembly requires methylation of histone H3 lysine 9 (H3K9me) and serves as a paradigm for understanding the importance of histone modifications in epigenetic genome control. Heterochromatin is nucleated at specific genomic sites and spreads across extended chromosomal domains to promote gene silencing. Moreover, heterochromatic structures can be epigenetically inherited in a self-templating manner, which is critical for stable gene repression. The spreading and inheritance of heterochromatin are believed to be dependent on preexisting H3K9 tri-methylation (H3K9me3), which is recognized by the histone methyltransferase Clr4/Suv39h via its chromodomain, to promote further deposition of H3K9me. However, the process involving the coupling of the “read” and “write” capabilities of histone methyltransferases is poorly understood. From an unbiased genetic screen, we characterize a dominant-negative mutation in histone H3 (H3G13D) that impairs the propagation of endogenous and ectopic heterochromatin domains in the fission yeast genome. H3G13D blocks methylation of H3K9 by the Clr4/Suv39h methyltransferase and acts in a dosage-dependent manner to interfere with the spreading and maintenance of heterochromatin. Our analyses show that the incorporation of unmethylatable histone H3G13D into chromatin decreases H3K9me3 density and thereby compromises the read-write capability of Clr4/Suv39h. Consistently, enhancing the affinity of Clr4/Suv39h for methylated H3K9 is sufficient to overcome the defects in heterochromatin assembly caused by H3G13D. Our work directly implicates methylated histones in the transmission of epigenetic memory and shows that a critical density threshold of H3K9me3 is required to promote epigenetic inheritance of heterochromatin through the read-write mechanism.