To uncover factors required for transcription by RNA polymerase II on chromatin, we fractionated a mammalian cell nuclear extract. We identified the histone chaperone TAF-I (also known as INHAT [inhibitor of histone acetyltransferase]), which was previously proposed to repress transcription, as a potent activator of chromatin transcription responsive to the vitamin D 3 receptor or to Gal4-VP16. TAF-I associates with chromatin in vitro and can substitute for the related protein NAP-1 in assembling chromatin onto cloned DNA templates in cooperation with the remodeling enzyme ATP-dependent chromatin assembly factor (ACF). The chromatin assembly and transcriptional activation functions are distinct, however, and can be dissociated temporally. Efficient transcription of chromatin assembled with TAF-I still requires the presence of TAF-I during the polymerization reaction. Conversely, TAF-I cannot stimulate transcript elongation when added after the other factors necessary for assembly of a preinitiation complex on naked DNA. Thus, TAF-I is required to facilitate transcription at a step after chromatin assembly but before transcript elongation.