Replicating single-stranded DNA is preferentially assembled into chromatin in Xenopus egg extracts relative to non-replicating double-stranded DNA. We have examined the molecular basis of this phenomenon. Single-stranded DNA itself is not a favored template for nucleosome assembly in comparison to double-stranded DNA. Complementary strand synthesis is required for the rapid assembly of nucleosomes. We present evidence that the assembly of chromatin on replicating DNA is a two step phenomenon. The first step involves the replication of DNA and the assembly of an intermediate structure, the second step involves the sequestration of histones H2A/H2B onto DNA. Histones H2A/H2B are preferentially sequestered onto replicated DNA in comparison to non-replicated DNA incubated in the extract.