Confinement of the X chromosome to a territory for dosage compensation is a prime example of how subnuclear compartmentalization is used to regulate transcription at the megabase scale. In Drosophila melanogaster, two sex-specific non-coding RNAs (roX1 and roX2) are transcribed from the X chromosome. They associate with the male-specific lethal (MSL) complex(1), which acetylates histone H4 lysine 16 and thereby induces an approximately twofold increase in expression of male X-linked genes(2,3). Current models suggest that X-over-autosome specificity is achieved by the recognition of cis-regulatory DNA high-affinity sites (HAS) by the MSL2 subunit(4,5). However, HAS motifs are also found on autosomes, indicating that additional factors must stabilize the association of the MSL complex with the X chromosome. Here we show that the low-complexity C-terminal domain (CTD) of MSL2 renders its recruitment to the X chromosome sensitive to roX non-coding RNAs. roX non-coding RNAs and the MSL2 CTD form a stably condensed state, and functional analyses in Drosophila and mammalian cells show that their interactions are crucial for dosage compensation in vivo. Replacing the CTD of mammalian MSL2 with that from Drosophila and expressing roX in cis is sufficient to nucleate ectopic dosage compensation in mammalian cells. Thus, the condensing nature of roX-MSL2(CTD) is the primary determinant for specific compartmentalization of the X chromosome in Drosophila. Dosage compensation in Drosophila involves nucleation of the dosage compensation complex at the X chromosome by MSL2 and the non-coding RNA roX.