Dosage compensation in Drosophila involves a 2-fold increase in transcription from the single male X relative to the two female X chromosomes. Regulation at the level of the chromosome involves alterations in chromatin organization: male X chromosomes appear decondensed and are marked by acetylation of histone H4 at lysine 16. We demonstrate that MOF, a protein required for dosage compensation with significant sequence similarity to the MYST family of acetyltransferases, is a histone acetyltransferase that acetylates chromatin specifically at histone H4 lysine 16. This acetylation relieves chromatin-mediated repression of transcription in vitro and in vivo if MOF is targeted to a promoter by fusion to a DNA-binding domain. Acetylation of chromatin by MOF, therefore, appears to be causally involved in transcriptional activation during dosage compensation.