Steroid receptors and coactivator proteins are thought to stimulate gene expression by facilitating the assembly of basal transcription factors into a stable preinitiation complex. What is not clear, however, is how these transcription factors gain access to transcriptionally repressed chromatin to modulate the transactivation of specific gene networks in vivo. The available evidence indicates that acetylation of chromatin in vivo is coupled to transcription and that specific histone acetyltransferases (HATs) target histones bound to DNA and overcome the inhibitory effect of chromatin on gene expression. The steroid-receptor coactivator SRC-1 is a coactivator for many members of the steroid-hormone receptor superfamily of ligand-inducible transcription factors. Here we show that SRC-1 possesses intrinsic histone acetyltransferase activity and that it also interacts with another HAT, p300/CBP-associated factor (PCAF). The HAT activity of SRC-1 maps to its carboxy-terminal region and is primarily specific for histones H3 and H4. Acetylation by SRC-1 and PCAF of histones bound at specific promoters may result from ligand binding to steroid receptors and could be a mechanism by which the activation functions of steroid receptors and associated coactivators enhance formation of a stable preinitiation complex, thereby increasing transcription of specific genes from transcriptionally repressed chromatin templates.