MENT is a developmentally regulated heterochromatin-associated protein that condenses chromatin in terminally differentiated avian blood cells. Its homology to the serpin protein family suggests that the conserved serpin reactive center loop (RCL) and the unique M-loop are important for its function. To examine the role of these domains, we studied the interaction of wild-type and mutant MENT with naked DNA and biochemically defined nucleosome arrays reconstituted from 12-mer repeats containing nucleosome positioning sequences. Wild-type MENT folded the naked DNA duplexes into closely juxtaposed parallel structures ("tramlines"). Deletion of the M-loop, but not inactivation of the RCL, prevented tramline formation and the cooperative interaction of MENT with DNA. Reconstitution of wild-type MENT with nucleosome arrays caused their tight folding and self-association. M-loop deletion inhibited nucleosome array folding, whereas the inactive RCL mutant was competent to fold the nucleosome arrays, but had a significantly impaired ability to cause their self-association. Bifunctional chemical cross-linking of MENT revealed oligomerization of wild-type MENT in the presence of chromatin and DNA. This oligomerization was severely reduced in the RCL mutant. We propose that the mechanism of MENT-induced heterochromatin formation involves two independent events: bringing together nucleosome linkers within a chromatin fiber and formation of protein bridges between chromatin fibers. Ordered binding of MENT to linker DNA via its unique M-loop domain promotes the folding of chromatin, whereas bridging of chromatin fibers is facilitated by MENT oligomerization mediated by the RCL.