Heterochromatin keeps in check selfish elements such as transposable elements (TEs) and satellite DNAs, which can wreak havoc on a genome by mobilizing and increasing their copy number, leading to genomic instability and sterility. Heterochromatin proteins (HPs) that mediate repression of selfish DNA may therefore be in an eternal arms race with selfish DNA. This arms race might explain the extensive sequence divergence discovered in some HPs which cause post-zygotic reproductive isolation. However, evidence for this model is limited. For my thesis work, I studied Lhr, a strong candidate gene, to test this model. Lhr encodes a rapidly evolving, HP1a interacting, HP that causes lethality in hybrids between D. melanogaster and D. simulans. To determine Lhr's normal function we knocked-out Lhr via homologous recombination in D. melanogaster. I discovered that Lhr mutant females have reduced fertility. Using mRNA-Seq, I found that Lhr regulates the steady state levels of many different satellite and TE transcripts. ChIP data argue that this increase is due to a defective post-transcriptional pathway. However, my analysis of small RNA-Seq data shows that small RNAs targeting most misregulated transposable elements are not affected and suggests instead that Lhr functions independently or downstream of the small RNA pathway. To address the effects of extensive sequence divergence of Lhr between D. melanogaster and D. simulans, I performed a RNA-Seq comparison of wildtype and Lhr mutant D. simulans lines. I discovered that loss of Lhr upregulates different transposable elements in D. melanogaster and D. simulans. Further, comparing the two species, I made the striking observation that localization of Lhr protein has expanded in D. melanogaster to encompass two satellites which account for nearly 6% of the D. melanogaster genome, but only 0.7% in the inferred ancestor of D. melanogaster and D. simulans. Finally, I found that Lhr is required for expression of heterochromatic genes, suggesting that it helps the host genes in D. melanogaster to adapt to the greatly expanded heterochromatic content of this species. My studies uncover an important component of the machinery that an organism uses to repress TEs and satellites, and to adapt to changes in selfish DNA. My work further demonstrates that each Lhr ortholog has adapted to repress different selfish elements in each species and provides support for the arms race model.