In the repeat array of ribosomal DNA (rDNA), only about half of the genes are actively transcribed while the others are silenced. In arthropods, transposable elements interrupt a subset of genes, often inactivating transcription of those genes. Little is known about the establishment or separation of juxtaposed active and inactive chromatin domains, or preferential inactivation of transposable element interrupted genes, despite identity in promoter sequences. CTCF is a sequence-specific DNA binding protein which is thought to act as a transcriptional repressor, block enhancer-promoter communication, and delimit juxtaposed domains of active and inactive chromatin; one or more of these activities might contribute to the regulation of this repeated gene cluster. In support of this hypothesis, we show that the Drosophila nucleolus contains CTCF, which is bound to transposable element sequences within the rDNA. Reduction in CTCF gene activity results in nucleolar fragmentation and reduced rDNA silencing, as does disruption of poly-ADP-ribosylation thought to be necessary for CTCF nucleolar localization. Our data establish a role for CTCF as a component necessary for proper control of transposable element-laden rDNA transcription and nucleolar stability.