The incorporation of histone variants into nucleosomes is a critical mechanism for regulating essential DNA-templated processes and for establishing distinct chromatin architectures with specialised functions. H2A.Z is an evolutionarily conserved H2A variant that has diverse roles in transcriptional regulation, heterochromatin boundary definition, chromosome stability and DNA repair. The H2A.Z C-terminus diverges in sequence from canonical H2A and imparts unique functions to H2A.Z in the yeast S. cerevisiae. Although mediated in part through the acid patch-containing M6 region, many molecular determinants of this divergent structure-function relationship remain unclear. Here, by using an unbiased random mutagenesis screen of H2A.Z alleles, we identify point mutations in the C-terminus outside of the M6 region that disrupt the normal function of H2A.Z in response to cytotoxic stress. These functional defects correlate with reduced chromatin association, which we attribute to reduced physical stability within chromatin, but also to altered interactions with the SWR and INO80 chromatin remodeling complexes. Together with experimental data, computational modelling of these residue changes in the context of protein structure suggests the importance of C-terminal domain integrity and configuration for maintaining the level of H2A.Z in nucleosomes.