Cyst nematodes are plant-pathogenic animals that secrete effector proteins into plant root cells to alter host gene expression and reprogram these cells to form specialized feeding sites, known as syncytia. The molecular mechanisms of these effectors are mostly unknown. We determined that the sugar beet cyst nematode (Heterodera schachtii) 32E03 effector protein strongly inhibits the activities of Arabidopsis thaliana histone deacetylases including the HDT1 enzyme, which has a known function in the regulation of rRNA gene expression through chromatin modifications. We determined that plants expressing the 32E03 coding sequence exhibited increased acetylation of histone H3 along the rDNA chromatin. At low 32E03 expression levels, these chromatin changes triggered the derepression of a subset of rRNA genes, which were conducive to H. schachtii parasitism. By contrast, high levels of 32E03 caused profound bidirectional transcription along the rDNA, which triggered rDNA-specific small RNA production leading to RNA-directed DNA methylation and silencing of rDNA, which inhibited nematode development. Our data show that the 32E03 effector alters plant rRNA gene expression by modulating rDNA chromatin in a dose-dependent manner. Thus, the 32E03 effector epigenetically regulates plant gene expression to promote cyst nematode parasitism.