Acetylation of lysines in histones H3 and H4 N-terminal tails is associated with transcriptional activation and deacetylation with repression. Our studies with the mouse mammary tumor virus (MMTV) promoter in chromatin show significant levels of acetylation at promoter proximal and distal regions prior to transactivation. Upon activation with glucocorticoids or progestins, promoter proximal histones become deacetylated within the region of inducible nuclease hypersensitivity. The deacetylation lags behind the initiation of transcription, indicating a role in post-activation regulation. Our results indicate a novel mechanism by which target promoters are regulated by steroid receptors and chromatin modification machinery.