Heat shock genes are poised for rapid transcriptional activation in response to environmental stress. A universal structural characteristic of such genes is the presence of a nucleosome-free, DNase I hypersensitive promoter region. Here we investigate the structural and functional effects of mutating HSE1, the preferred heat shock factor (HSF) binding site upstream of the yeast HSP82 gene. In situ deletion or substitution of this sequence reduces both basal and induced transcription by at least two orders of magnitude. Moreover, such mutations lead to a dramatic transition in chromatin structure: the DNase I hypersensitive region is replaced by two stable, sequence-positioned nucleosomes. One of these is centered over the mutated heat shock element, while the other--as revealed by DNase I genomic footprinting--is precisely positioned in a rotational sense over the TATA-initiation site. Overexpression of yeast HSF strongly suppresses the null phenotype of the induced hsp82-delta HSE1 gene and re-establishes DNase I hypersensitivity over its promoter. Such suppression is mediated through sequence disposed immediately upstream of HSE1 and containing two low affinity heat shock elements. These data imply a critical role for HSF in displacing stably positioned nucleosomes in Saccharomyces cerevisiae and suggest that HSF transcriptionally activates HSP82 at least partly through its ability to alleviate nucleosome repression of the core promoter.