Establishment of cellular memory and its faithful propagation is critical for successful development of multicellular organisms. As pluripotent cells differentiate, choices in cell fate are inherited and maintained by their progeny throughout the lifetime of the organism. A major factor in this process is the epigenetic inheritance of specific transcriptional states or transcriptional memory. In this review, we discuss chromatin transitions and mechanisms by which they are inherited by subsequent generations. We also discuss illuminating cases of cellular memory in budding yeast and evaluate whether transcriptional memory in yeast is nuclear or cytoplasmically inherited.