Eukaryotic transcription can be regulated over tens or even hundreds of kilobases. We show that such long-range gene regulation in vivo involves spatial interactions between transcriptional elements, with intervening chromatin looping out. The spatial organization of a 200 kb region spanning the murine beta-globin locus was analyzed in expressing erythroid and nonexpressing brain tissue. In brain, the globin cluster adopts a seemingly linear conformation. In erythroid cells the hypersensitive sites of the locus control region (LCR), located 40-60 kb away from the active genes, come in close spatial proximity with these genes. The intervening chromatin with inactive globin genes loops out. Moreover, two distant hypersensitive regions participate in these interactions. We propose that clustering of regulatory elements is key to creating and maintaining active chromatin domains and regulating transcription.