Programmed DNA rearrangements, including DNA diminution, characterize the differentiation of somatic from germline nuclei in several developmental systems. Pdd1p (Programmed DNA degradation protein 1), a development-restricted polypeptide, has been implicated in heterochromatin assembly and DNA degradation during ciliate macronuclear development. Here, cross-linking and co-immunoprecipitation were used to verify that Pdd1p-associated chromatin is enriched in germline-restricted DNA. Pdd1p-associated proteins include general core histones and a second anlagen-enriched polypeptide (Pdd2p, formerly known as p43). Immunoblotting analyses demonstrate that, like Pdd1p, Pdd2p is developmentally regulated and present in conjugating cells during the time of germline DNA rearrangements and degradation. Pdd2p is post-translationally modified by phosphorylation at a time in development corresponding to dephosphorylation of Pdd1p and the formation of heterochromatic DNA elimination structures. Following gene cloning, the derived amino acid sequence of the PDD2 gene predicts a novel polypeptide containing multiple putative phosphorylation sites. In situ analyses, using both light and electron microscopy, demonstrate that Pdd1p and Pdd2p co-localize in DNA elimination structures within developing macronuclei. However, unlike Pdd1p, which also localizes to apoptotic macronuclei, Pdd2p appears to be restricted to a higher degree to germline DNA elimination structures. Taken together, the data presented here demonstrate a physical link between Pdd1p and germline-restricted chromatin and establish Pdd2p as the second member of a small group of developmentally restricted polypeptides implicated in programmed DNA elimination.