Transcriptome analyses show a surprisingly large proportion of the mammalian genome is transcribed; much more than can be accounted for by genes and introns alone. Most of this transcription is non-coding in nature and arises from intergenic regions, often overlapping known protein-coding genes in sense or antisense orientation. The functional relevance of this widespread transcription is unknown. Here we characterize a promoter responsible for initiation of an intergenic transcript located approximately 3.3 kb and 10.7 kb upstream of the adult-specific human β-globin genes. Mutational analyses in β-YAC transgenic mice show that alteration of intergenic promoter activity results in ablation of H3K4 di- and tri-methylation and H3 hyperacetylation extending over a 30 kb region immediately downstream of the initiation site, containing the adult δ- and β-globin genes. This results in dramatically decreased expression of the adult genes through position effect variegation in which the vast majority of definitive erythroid cells harbor inactive adult globin genes. In contrast, expression of the neighboring ε- and γ-globin genes is completely normal in embryonic erythroid cells, indicating a developmentally specific variegation of the adult domain. Our results demonstrate a role for intergenic non-coding RNA transcription in the propagation of histone modifications over chromatin domains and epigenetic control of β-like globin gene transcription during development.