Acetylation provides one mechanism by which the functional diversity of individual transcription factors can be expanded. This is valuable in the setting of complex multigene loci that are regulated by a limited number of proteins, such as the human beta-globin locus. We have studied the role of acetylation in the regulation of the transcription factor NF-E4, a component of a protein complex that facilitates the preferential expression of the human gamma-globin genes in fetal erythroid cells. We have shown that NF-E4 interacts directly with, and serves as a substrate for, the acetyltransferase co-activator PCAF. Acetylation of NF-E4 is restricted to a single residue (Lys(43)) in the amino-terminal domain of the protein and results in two important functional consequences. Acetylation of NF-E4 prolongs the protein half-life by preventing ubiquitin-mediated degradation. This stabilization is PCAF-dependent, since enforced expression in fetal/erythroid cells of a mutant form of PCAF lacking the histone acetyltransferase domain (PCAFDeltaHAT) decreases NF-E4 stability. Acetylation of Lys(43) also reduces the interaction between NF-E4 and HDAC1, potentially maximizing the activating ability of the factor at the gamma-promoter. These results provide further demonstration that co-activators, such as PCAF, can influence individual transcription factor properties at multiple levels to alter their effects on gene expression.