Chromosomes are folded into intricate, higher-order structures and packed within the nucleus of the cell. This elaborate folding regime allows for crucial interphase genomic functions including transcriptional regulation and replication, while preventing entanglements that could lead to chromosomal translocations. Contiguous stretches of chromatin interact to form topologically associating domains (TADs) that are separated by boundaries. Chromatin interacts more with other chromatin in the TAD than with neighboring regions across a boundary. TADs are proposed to be formed by loop extrusion, a process in which the cohesin complex extrudes along chromatin forming an increasingly larger loop until blocked by the boundary elements. Independent of TADs, chromatin preferentially interacts with other chromatin regions with similar properties, a process known as compartmentalization. Compartmentalization further folds the chromosome in 3D to create a more globular chromosome shape. Importantly, each chromosome forms its own globular domain, or chromosome territory, within the nucleus. These territories minimally interact with each other, promoting instead interactions along the same chromosome polymer. Chromosome territories are also proposed to be mediated by loop extrusion by an alternative loop extruder, condensin II. Interestingly, TADs and compartments have emerged as antagonistic levels of organization, with cohesin-mediated loop extrusion breaking compartmental boundaries. However, the mechanisms by which condensin II mediates chromosome territories and the consequential effects on compartments and TADs are unknown. Here, we explore the effects of condensin II over-activity and under-activity on intra-compartmental interactions in Drosophila BG3 cells. We use novel FISH approaches and high-resolution Hi-C to challenge the notion that compartments form independently of loop extrusion events and instead demonstrate a critical role for condensin II-mediated loop extrusion in mediating long-range compartmental interactions. Additionally, we identify a novel feature of Hi-C maps, termed “pericentric super-stripes”, which emerge with condensin II overactivity. Our results suggest a compelling model in which condensin II propels distal chromatin regions towards each other along the same chromosome polymer, providing proximity required for chromatin to aggregate into compartments.