The yeast ATF/CREB repressor Sko1(Acr1) regulates genes that are induced upon hyperosmotic stress by recruiting the Cyc8(Ssn6)-Tup1 corepressor complex to target promoters. During hyperosmotic stress, Hog1 MAP kinase associates with target promoters, phosphorylates Sko1, and converts Sko1 into a transcriptional activator. Unexpectedly, Tup1 remains bound to target promoters during osmotic stress. Sko1, Hog1, and Tup1 are all important for recruitment of SAGA histone acetylase and SWI/SNF nucleosome-remodeling complexes to osmotic-inducible promoters, and both complexes are important for activation upon osmotic stress. Thus, osmotic induction involves a switch of Sko1-Cyc8-Tup1 from a repressing to an activating state in a process that is triggered by Hog1 phosphorylation. Cyc8-Tup1 is not simply a corepressor but is also involved in recruiting SWI/SNF and SAGA during the transcriptional induction process.