We explored the mechanisms of chromatin compaction and transcriptional regulation by poly(ADP-ribose) polymerase 1 (PARP-1), a nucleosome-binding protein with an NAD+-dependent enzymatic activity. By using atomic force microscopy and a complementary set of biochemical assays with reconstituted chromatin, we showed that PARP-1 promotes the localized compaction of chromatin into supranucleosomal structures in a manner independent of the amino-terminal tails of core histones. In addition, we defined the domains of PARP-1 required for nucleosome binding, chromatin compaction, and transcriptional repression. Our results indicate that the DNA binding domain (DBD) of PARP-1 is necessary and sufficient for binding to nucleosomes, yet the DBD alone is unable to promote chromatin compaction and only partially represses RNA polymerase II-dependent transcription in an in vitro assay with chromatin templates (∼50% of the repression observed with wild-type PARP-1). Furthermore, our results show that the catalytic domain of PARP-1, which does not bind nucleosomes on its own, cooperates with the DBD to promote chromatin compaction and efficient transcriptional repression in a manner independent of its enzymatic activity. Collectively, our results have revealed a novel function for the catalytic domain in chromatin compaction. In addition, they show that the DBD and catalytic domain cooperate to regulate chromatin structure and chromatin-dependent transcription, providing mechanistic insights into how these domains contribute to the chromatin-dependent functions of PARP-1.