Modification of histones, DNA-binding proteins found in chromatin, by addition of acetyl groups occurs to a greater degree when the histones are associated with transcriptionally active DNA. A breakthrough in understanding how this acetylation is mediated was the discovery that various transcriptional co-activator proteins have intrinsic histone acetyltransferase activity (for example, Gcn5p, PCAF, TAF(II)250 and p300/CBP. These acetyltransferases also modify certain transcription factors (TFIIEbeta, TFIIF, EKLF and p53). GATA-1 is an important transcription factor in the haematopoietic lineage and is essential for terminal differentiation of erythrocytes and megakaryocytes. It is associated in vivo with the acetyltransferase p300/CBP. Here we report that GATA-1 is acetylated in vitro by p300. This significantly increases the amount of GATA-1 bound to DNA and alters the mobility of GATA-1-DNA complexes, suggestive of a conformational change in GATA-1. GATA-1 is also acetylated in vivo and acetylation directly stimulates GATA-1-dependent transcription. Mutagenesis of important acetylated residues shows that there is a relationship between the acetylation and in vivo function of GATA-1. We propose that acetylation of transcription factors can alter interactions between these factors and DNA and among different transcription factors, and is an integral part of transcription and differentiation processes.