During mitosis, replicated sister chromatids are attached to opposite sides of a microtubule spindle at their centromeres in a process called biorientation. The proteinaceous structure that links centromeres, a region of the chromosome, to the spindle is called the kinetochore. Tension within kinetochores of bioriented chromosomes is thought to be crucial for accurate chromosome segregation. The simplest method of generating tension within kinetochores in bioriented chromosomes would be sister chromatid cohesion at the centromere. However, across phylogeny, sister centromeres are separated by 800-1000 nm. Using Saccharomyces cerevisiae, we explore how pericentric chromatin, the 20-50 kb region surrounding the centromere, is organized to allow for tension to be generated and regulated at the centromere during mitosis. Pericentric chromatin is enriched in the ring-like protein complexes condensin and cohesin. We find that the pericentromeric region contains several of chromatin loops formed by condensin and cross-linked by cohesin. Simulations of chromatin loops recapitulate the experimental observation that fluorescently labeled regions within pericentric chromatin to appear as compact foci radially displaced from, i.e. above or below, the sister kinetochore. Live-cell imaging experiments with a dicentric plasmid, a circular double stranded DNA molecule that can biorient without replication due to the presence of two centromeres, illustrated the mitotic spindle has sufficient force to extend chromatin during metaphase. Simulations revealed that chromatin loops isolate tension to a geometric subset of chromatin that is directly in between, not above or below, sister kinetochores. Thus, the majority of pericentric chromatin, which is contained in compact loops, is under reduced tension. Additionally, chromatin loops explain the distributions of pericentric cohesin and condensin. Cohesin’s radial, barrel-like distribution is due to its ability to diffuse to the radial tips of the loops. Condensin’s ability to form chromatin loops requires condensin to bind to the high-tension chromatin on either side of the low-tension loop, forcing condensin to colocalize with the axial, high-tension chromatin. Chromatin loops recapitulate experimental observations of pericentric chromatin and provide an elegant mechanism for tension modulation at the centromere during mitosis.