The human ISWI-containing factor RSF (remodeling and spacing factor) was found to mediate nucleosome deposition and, in the presence of ATP, generate regularly spaced nucleosome arrays. Using this system, recombinant chromatin was reconstituted with bacterially produced histones. Acetylation of the histone tails was found to play an important role in establishing regularly spaced nucleosome arrays. Recombinant chromatin lacking histone acetylation was impaired in directing transcription. Histone-tail modifications were found to regulate transcription from the recombinant chromatin. Acetylation of the histone tails by p300 was found to increase transcription. Methylation of the histone H3 tail by Suv39H1 was found to repress transcription in an HP1-dependent manner. The effects of histone-tail modifications were observed in nuclear extracts. A highly reconstituted RNA polymerase II transcription system was refractory to the effect imposed by acetylation and methylation.