Chromosomes are dynamic structures that are reorganized during the cell cycle to optimize them for distinct functions. SMC and non-SMC condensin proteins associate into complexes that have been implicated in the process of chromosome condensation. The roles of the individual non-SMC subunits of the complex are poorly understood, and mutations in the CAP-G subunit have not been described in metazoans. Here we elucidate a role for dCAP-G in chromosome condensation and cohesion in Drosophila. We illustrate the requirement of dCAP-G for condensation during prophase and prometaphase; however, we find that alternate mechanisms ensure that replicated chromosomes are condensed prior to metaphase. In contrast, dCAP-G is essential for chromosome condensation in metaphase of single, unreplicated sister chromatids, suggesting that there is an interplay between replicated chromatids and the condensin complex. In the dcap-g mutants, defects in sister-chromatid separation are also observed. Chromatid arms fail to resolve in prophase and are unable to separate at anaphase, whereas sister centromeres show aberrant separation in metaphase and successfully move to spindle poles at anaphase. We also identified a role for dCAP-G during interphase in regulating heterochromatic gene expression.