The embryonic genome is formed by fusion of a maternal and a paternal genome. To accommodate the resulting diploid genome in the fertilized oocyte dramatic global genome reorganizations must occur. The higher order structure of chromatin in vivo is critically dependent on architectural chromatin proteins, with the family of linker histone proteins among the most critical structural determinants. Although somatic cells contain numerous linker histone variants, only one, H1FOO, is present in mouse oocytes. Upon fertilization H1FOO rapidly populates the introduced paternal genome and replaces sperm-specific histone-like proteins. The same dynamic replacement occurs upon introduction of a nucleus during somatic cell nuclear transfer. To understand the molecular basis of this dynamic histone replacement process, we compared the localization and binding dynamics of somatic H1 and oocyte-specific H1FOO and identified the molecular determinants of binding to either oocyte or somatic chromatin in living cells. We find that although both histones associate readily with chromatin in nuclei of somatic cells, only H1FOO is capable of correct chromatin association in the germinal vesicle stage oocyte nuclei. This specificity is generated by the N-terminal and globular domains of H1FOO. Measurement of in vivo binding properties of the H1 variants suggest that H1FOO binds chromatin more tightly than somatic linker histones. We provide evidence that both the binding properties of linker histones as well as additional, active processes contribute to the replacement of somatic histones with H1FOO during nuclear transfer. These results provide the first mechanistic insights into the crucial step of linker histone replacement as it occurs during fertilization and somatic cell nuclear transfer.