The regulation of gene expression depends critically upon chromatin structure. Transcription of protein-coding genes can be reconstituted on naked DNA with only the general transcription factors and RNA polymerase II. This minimal system cannot transcribe DNA packaged into chromatin, indicating that accessory factors may facilitate access to DNA. Two classes of accessory factor, ATP-dependent chromatin-remodelling enzymes and histone acetyltransferases, facilitate transcription initiation from chromatin templates. FACT (for facilitates chromatin transcription) is a chromatin-specific elongation factor required for transcription of chromatin templates in vitro. Here we show that FACT comprises a new human homologue of the Saccharomyces cerevisiae Spt16/Cdc68 protein and the high-mobility group-1-like protein structure-specific recognition protein-1. Yeast SPT16/CDC68 is an essential gene that has been implicated in transcription and cell-cycle regulation. Consistent with our biochemical analysis of FACT, we provide evidence that Spt16/Cdc68 is involved in transcript elongation in vivo. Moreover, FACT specifically interacts with nucleosomes and histone H2A/H2B dimers, indicating that it may work by promoting nucleosome disassembly upon transcription. In support of this model, we show that FACT activity is abrogated by covalently crosslinking nucleosomal histones.