The CCAAT displacement protein/cut homologue (CDP/cut) is a divergent homeodomain protein that is highly conserved through evolution and has properties of a potent transcriptional repressor. CDP/cut contains three conserved cut-repeat domains and a conserved homeobox, each involved in directing binding specificity to unique nucleotide sequence elements. Furthermore, CDP/cut may play a role as a structural component of chromatin through its direct interaction with nucleosomal DNA and association with nuclear matrix attachment regions. CDP/cut is cell-cycle regulated through interactions with Rb, p107, specific kinases and phosphatases directing the transcriptional activity of CDP/cut on such genes encoding p21(WAF1,CIP1), c-myc, thymidine kinase, and histones. Our previous studies indicate that CDP/cut is associated with histone deacetylase activity and is associated with a corepressor complex through interactions with histone deacetylases. Here, we report the interaction of CDP/cut with CBP and p300/CREB-binding protein-associated factor (PCAF) along with the modification of CDP/cut by the histone acetyltransferase PCAF. Acetylation of CDP/cut by PCAF is directed at conserved lysine residues near the homeodomain region and regulates CDP/cut function. These observations are consistent with the ability of CDP/cut to regulate genes as a transcriptional repressor, suggesting acetylation as a mechanism that regulates CDP/cut function.