The chromatin structure of the PHO5 promoter is disrupted when the promoter is derepressed by phosphate starvation. The transactivator, Pho4, is primarily responsible for this change. We have used deletion mutations of Pho4 in order to determine which protein domains are involved in nucleosome dissolution. Our results show that the DNA binding domain by itself is not sufficient to trigger chromatin disruption, even when overexpressed. In vivo footprinting reveals that Pho4 derivatives lacking the N-terminal activation domain can bind to UASp1, which resides in a constitutively nucleosome-free region, but not to UASp2, which lies within a nucleosome in the repressed PHO5 promoter. The acidic activation domain of Pho4 appears to be involved in nucleosome disruption. Substitution of the native transactivation domain of Pho4 with that from VP16 results in substantial chromatin disruption. In every case, the ability of the Pho4 mutants to activate transcription correlates with their ability to disrupt nucleosome structure in the PHO5 promoter. Therefore, we conclude that the Pho4 activation domain has at least two roles: (i) to trigger disruption of nucleosome structure over the promoter, thereby facilitating the binding of transcription factors, and (ii) to interact with the transcriptional apparatus at the proximal promoter.