Eukaryotic DNA is organized into nucleosomes and higher order chromatin structure, which plays an important role in the regulation of many nuclear processes including DNA repair. Non-homologous end-joining, the major pathway for repairing DNA double-strand breaks (DSBs) in mammalian cells, is mediated by a set of proteins including DNA-dependent protein kinase (DNA-PK). DNA-PK is comprised of a large catalytic subunit, DNA-PKcs, and its regulatory subunit, Ku. Current models predict that Ku binds to the ends of broken DNA and DNA-PKcs is recruited to form the active kinase complex. Here we show that DNA-PK can be activated by nucleosomes through the ability of Ku to bind to the ends of nucleosomal DNA, and that the activated DNA-PK is capable of phosphorylating H2AX within the nucleosomes. Histone acetylation has little effect on the steps of Ku binding to nucleosomes and subsequent activation of DNA-PKcs. However, acetylation largely enhances the phosphorylation of H2AX by DNA-PK, and this acetylation effect is observed when H2AX exists in the context of nucleosomes but not in a free form. These results suggest that the phosphorylation of H2AX, known to be important for DSB repair, can be regulated by acetylation and may provide a mechanistic basis on which to understand the recent observations that histone acetylation critically functions in repairing DNA DSBs.