In nematodes, flies, and mammals, dosage compensation equalizes X-chromosome gene expression between the sexes through chromosome-wide regulatory mechanisms that function in one sex to adjust the levels of X-linked transcripts. Here, a dosage compensation complex was identified in the nematode Caenorhabditis elegans that reduces transcript levels from the two X chromosomes in hermaphrodites, This complex contains at least four proteins, including products of the dosage compensation genes dpy-26 and dpy-27. Specific localization of the complex to the hermaphrodite X chromosomes is conferred by XX-specific regulatory genes that coordinately control both sex determination and dosage compensation.