Chromatin structure plays a key role in regulating gene expression and embryonic differentiation; however, the factors that determine the organization of chromatin around regulatory sites are not fully known. Here we show that HMGN1, a nucleosome-binding protein ubiquitously expressed in vertebrate cells, preferentially binds to CpG island-containing promoters and affects the organization of nucleosomes, DNase I hypersensitivity, and the transcriptional profile of mouse embryonic stem cells and neural progenitors. Loss of HMGN1 alters the organization of an unstable nucleosome at transcription start sites, reduces the number of DNase I-hypersensitive sites genome wide, and decreases the number of nestin-positive neural progenitors in the subventricular zone (SVZ) region of mouse brain. Thus, architectural chromatin-binding proteins affect the transcription profile and chromatin structure during embryonic stem cell differentiation.