Background: Aberrant chromatin structure in cancer cells results from altered proteins involved in its packaging. Heterochromatin protein 1 gamma (HP1 gamma) is a non-histone heterochromatic protein that functions to maintain chromatin stability and is important in embryonic development. Given an interest in the role developmental genes play in cancer, we investigated HP1 gamma expression in prostate cancer (PCa) and its prognostic associations. Methods: Tissue microarrays consisting of benign (N = 96), localized cancer (N = 146), metastatic PCa (N = 44), and HGPIN (N = 50) were immunoflourescently stained for HP1 gamma and Ki-67. Using a novel, automated quantitative imaging system, VECTRA (TM), epithelial staining in both the nucleus and cytoplasm was quantified and compared against clinicopathologic variables. Results: HP1 gamma is significantly elevated in HGPIN (80%), localized PCa (76%), and metastatic PCa (98%) compared to benign tissues from both the nuclear and cytoplasmic compartments (P < 0.0001). Increased nuclear and total HP1 gamma expression was associated with Gleason score (P = 0.02 and P = 0.04 respectively). Given known binding to the C-terminus of Ki-67, a co-expression analysis was performed that revealed a correlation between nuclear and cytoplasmic HP1 gamma and Ki-67 (Pearson Coefficient 0.321 and 0.562 respectively, P < 0.0001). Cox survival analysis demonstrated that cytoplasmic HP1 gamma expression was an independent prognostic marker and out-performed pathological Gleason score for predicting PSA-recurrence after radical prostatectomy. Conclusions: In this first detailed analysis of HP1 gamma expression in cancer, VECTRA (TM) demonstrates compartmentalized and total HP1 gamma protein expression is increased in PCa and that expression correlates with clinical outcomes better than Gleason score. Given the critical role HP1 gamma plays in chromatin organization and gene expression, it represents a novel prognostic and therapeutic target.