RNA silencing pathways are evolutionarily conserved mechanisms that control gene expression via sequence-specific interactions mediated by a small RNA bound to an Argonaute (AGO) effector protein. The paradigm for how RNA silencing controls gene expression at the chromatin level comes from studies in fission yeast, in which the RNAi machinery establishes heterochromatin at the centromere and mating type locus to ensure proper chromosome segregation and to promote stability of repetitive regions. At the centromere, RNAs transcribed from pericentromeric repeats are processed by the Dcr1 endonuclease and Ago1 Argonaute protein, which leads to the recruitment of the histone H3K9 methyltransferase and Swi6/HP1 binding (for review, see Grewal and Elgin 2007). In Drosophila, it remains unclear whether the RNAi pathway is involved directly in heterochromatin formation. The primary endogenous function of the RNAi/siRNA pathway is to silence the expression of transposable elements (TEs) in the soma (for review, see Okamura and Lai 2008). Silencing is achieved by Dcr-2-mediated cleavage of dsRNAs into 21- to 22-nucleotide (nt) siRNA that are loaded into AGO2, which cleaves the target TE mRNA using its Slicer activity. Less well understood is the function of non-TE endo-siRNAs also produced by Dcr-2 activity and loaded into AGO2, which are generated from hairpin transcripts and regions of 3′ overlap of convergent transcripts (3′ cis-NATs). Two studies implicated AGO2 in heterochromatin formation based on mislocalization of HP1 and desilencing of pericentromeric transcriptional reporters in AGO2 mutants (Deshpande et al. 2005; Fagegaltier et al. 2009). However, direct analysis of HP1 recruitment by chromatin immunoprecipitation (ChIP) and HP1-dependent silencing at small RNA-generating loci led to the suggestion that AGO2 and other Argonaute genes may not be required for heterochromatin formation in the soma (Moshkovich and Lei 2010). Nevertheless, AGO2 or other RNA silencing factors appear to play important roles in chromatin and nuclear organization, such as formation of Polycomb group (PcG) repression bodies (Grimaud et al. 2006) and gypsy chromatin insulator bodies (Lei and Corces 2006). Chromatin insulators are DNA–protein complexes defined functionally as either barriers that prevent the spread of silent chromatin or enhancer blockers that constrain enhancer–promoter communication. Unlike vertebrates, which possess only one known insulator protein, CTCF (for review, see Phillips and Corces 2009), Drosophila employs at least five different insulator complexes. Two well-characterized insulators are the gypsy [also known as Su(Hw)] insulator and the Fab-8 insulator of the Abd-B locus in the bithorax complex (BX-C) (for review, see Bushey et al. 2008). The gypsy and Fab-8 insulators harbor binding sites for the zinc finger DNA-binding proteins Su(Hw) and CTCF, respectively, and both insulator complexes share a common component: CP190. Despite thousands of distinct DNA-binding sites throughout the genome, insulator proteins concentrate at a small number of nuclear foci, termed insulator bodies, which are dependent on CP190 for their integrity. Highly correlated at least with gypsy insulator function, insulator bodies have been proposed to serve as tethering sites for large chromosomal loops or other higher-order chromatin structures. It has become increasingly apparent that DNA topology is a critical determinant of gene regulation. While enhancers activate their target promoters over long distances, insulators act to restrict these communications (for review, see Wallace and Felsenfeld 2007). Insulators and other cis-regulatory regions in the Abd-B locus engage in numerous interactions, and the precise topology of the locus has been postulated to be a central mechanism of tissue-specific Abd-B regulation (Cleard et al. 2006; Lanzuolo et al. 2007; Kyrchanova et al. 2008; Bantignies et al. 2011). However, the mechanism by which chromosome looping is achieved at this locus has not been elucidated. Vertebrate CTCF has been demonstrated to mediate chromosomal looping at several developmentally regulated loci in concert with cohesin (for review, see Merkenschlager 2010), but it is not known whether Drosophila CTCF, which only shares homology in the zinc finger DNA-binding domain, retains the capacity to promote looping. In order to address whether AGO2 functions on chromatin, we performed ChIP-seq analysis of AGO2 in two Drosophila cell lines. Instead of repetitive sequence, AGO2 associates primarily with euchromatic sites, the majority of which correspond to chromatin insulators. Intriguingly, AGO2 chromatin association does not correspond to regions of the genome that produce endo-siRNAs. We demonstrate that AGO2, but not its catalytic activity or other RNAi components, is required for CTCF/CP190-dependent Fab-8 insulator function. Additionally, AGO2 interacts physically with CP190, and depletion of either CP190 or CTCF results in a decrease in AGO2 recruitment throughout the genome. Chromosome conformation capture (3C) experiments demonstrate that CTCF/CP190-dependent looping interactions may regulate AGO2 recruitment to chromatin. Therefore, we propose an RNAi-independent role for AGO2 to promote or stabilize insulator-dependent looping interactions to define transcriptional domains throughout the genome.