Here we analyze the essential process of X-chromosome dosage compensation (DC) to elucidate mechanisms that control the assembly, genome-wide binding, and function of gene regulatory complexes that act over large chromosomal territories. We demonstrate that a subunit of Caenorhabditis elegans MLL/COMPASS, a gene activation complex, acts within the DC complex (DCC), a condensin complex, to target the DCC to both X chromosomes of hermaphrodites for chromosome-wide reduction of gene expression. The DCC binds to two categories of sites on X: rex (recruitment element on X) sites that recruit the DCC in an autonomous, sequencedependent manner, and dox (dependent on X) sites that reside primarily in promoters of expressed genes and bind the DCC robustly only when attached to X.We find that DC mutations that abolish rex site binding greatly reduce dox site binding but do not eliminate it. Instead, binding is diminished to the low level observed at autosomal sites in wild-type animals. Changes in DCC binding to these non-rex sites occur throughout development and correlate directly with transcriptional activity of adjacent genes. Moreover, autosomal DCC binding is enhanced by rex site binding in cis in X-autosome fusion chromosomes. Thus, dox and autosomal sites have similar binding potential but are distinguished by linkage to rex sites. We propose a model for DCC binding in which low-level DCC binding at dox sites is dictated by intrinsic properties correlated with high transcriptional activity. Sex-specific DCC recruitment to rex sites then enhances the magnitude of DCC binding to dox sites in cis, which lack high affinity for the DCC on their own. We also show that the DCC balances X-chromosome gene expression between sexes by controlling transcription. © 2011 by Cold Spring Harbor Laboratory Press.