Structural Maintenance of Chromosomes (SMC) complexes, cohesin and condensins, were named for their roles in meiotic and mitotic chromosome separation and compaction. Recent data from mammalian cells and Drosophila have described additional roles for cohesin in folding the interphase genome into loops and domains. However, determinants of genome folding in holocentric species remain unclear. Using high-resolution chromosome conformation capture, we show that C. elegans chromosomes exhibit two types of compartments: a large-scale compartmentalization that corresponds to central vs telomere proximal regions and a small-scale compartmentalization that reflects epigenomic states. By systematically and acutely inactivating each SMC complex, we find that in contrast to other organisms, condensin I plays a major role in long-range genome folding, while cohesin creates small loops. Loss of condensin I causes genome-wide decompaction, chromosome mixing, and disappearance of TAD structures, while reinforcing fine-scale epigenomic compartments. Counter-intuitively, the removal of condensin I and its X-specific variant condensin I DC from the X chromosomes reveals the existence of a third compartment grouping together a subset of previously characterized loading sites for condensin I DC and binding sites for the X-targeting complex SDC. While transcriptional changes were minor for all autosomes upon cohesin, condensin II, and condensin I/I DC inactivation, removal of condensin I/I DC from the X chromosome led to transcriptional up-regulation of X-linked genes. In conclusion, we describe a novel function for C. elegans condensin I/I DC in holocentric interphase chromosome organization, which substitutes the role played by cohesin in other organisms.