A cell free system that supports replication-dependent chromatin assembly has been used to determine the mechanism of histone deposition during DNA replication. CAF-I, a human cell nuclear factor, promotes chromatin assembly on replicating SV40 DNA in the presence of a crude cytosol replication extract. Biochemical fractionation of the cytosol extract has allowed separation of the chromatin assembly reaction into two steps. During the first step, CAF-I targets the deposition of newly synthesized histones H3 and H4 to the replicating DNA. This reaction is dependent upon and coupled with DNA replication, and utilizes the newly synthesized forms of histones H3 and H4, which unlike bulk histone found in chromatin, do not bind to DNA by themselves. The H3/H4-replicated DNA complex is a stable intermediate which exhibits a micrococcal nuclease resistant structure and can be isolated by sucrose gradient sedimentation. In the second step, this replicated precursor is converted to mature chromatin by the addition of histones H2A and H2B in a reaction that can occur after DNA replication. The requirement for CAF-I in at least the first step of the reaction suggests a level of cellular control for this fundamental process.