Functional compartmentalization of eukaryotic genomes is thought to be necessary for the proper regulation of gene expression. Chromatin insulators or boundary elements have been implicated in the establishment of this compartmentalization, as they may be involved in creating independent chromatin domains. Recent advances in understanding the mechanisms of insulator function suggest a role for boundary elements in determining transcriptional identity of chromatin and in organizing chromatin into structural compartments within the nucleus. Insulators may thus be involved in setting up topological chromatin domains associated with particular transcriptional states.