During cell division, chromosomes are segregated to nascent daughter cells by attaching to the microtubules of the mitotic spindle through the kinetochore. Kinetochores are assembled on a specialized chromatin domain called the centromere, which is characterized by the replacement of nucleosomal histone H3 with the histone H3 variant centromere protein A (CENP-A). CENP-A is essential for centromere and kinetochore formation in all eukaryotes but it is unknown how CENP-A chromatin directs centromere and kinetochore assembly. Here we generate synthetic CENP-A chromatin that recapitulates essential steps of centromere and kinetochore assembly in vitro. We show that reconstituted CENP-A chromatin when added to cell-free extracts is sufficient for the assembly of centromere and kinetochore proteins, microtubule binding and stabilization, and mitotic checkpoint function. Using chromatin assembled from histone H3/CENP-A chimaeras, we demonstrate that the conserved carboxy terminus of CENP-A is necessary and sufficient for centromere and kinetochore protein recruitment and function but that the CENP-A targeting domain--required for new CENP-A histone assembly--is not. These data show that two of the primary requirements for accurate chromosome segregation, the assembly of the kinetochore and the propagation of CENP-A chromatin, are specified by different elements in the CENP-A histone. Our unique cell-free system enables complete control and manipulation of the chromatin substrate and thus presents a powerful tool to study centromere and kinetochore assembly.