Chromosome condensation and the global repression of gene transcription are features of mitosis in most eukaryotes. The logic behind this phenomenon is that chromosome condensation prevents the activity of RNA polymerases. In budding yeast, however, transcription was proposed to be continuous during mitosis. Here we show that Cdc14, a protein phosphatase required for nucleolar segregation and mitotic exit, inhibits transcription of yeast ribosomal genes (rDNA) during anaphase. The phosphatase activity of Cdc14 is required for RNA polymerase I (Pol I) inhibition in vitro and in vivo. Moreover Cdc14-dependent inhibition involves nucleolar exclusion of Pol I subunits. We demonstrate that transcription inhibition is necessary for complete chromosome disjunction, because ribosomal RNA (rRNA) transcripts block condensin binding to rDNA, and show that bypassing the role of Cdc14 in nucleolar segregation requires in vivo degradation of nascent transcripts. Our results show that transcription interferes with chromosome condensation, not the reverse. We conclude that budding yeast, like most eukaryotes, inhibit Pol I transcription before segregation as a prerequisite for chromosome condensation and faithful genome separation. ©2009 Macmillan Publishers Limited. All rights reserved.