The Negative Elongation Factor (NELF) is a transcription regulatory complex that induces stalling of RNA polymerase II (Pol II) during early transcription elongation and represses expression of several genes studied to date, including Drosophila Hsp70, mammalian proto-oncogene junB, and HIV RNA. To determine the full spectrum of NELF target genes in Drosophila, we performed a microarray analysis of S2 cells depleted of NELF and discovered that NELF RNAi affects many rapidly inducible genes involved in cellular responses to stimuli. Surprisingly, only one-third of NELF target genes were, like Hsp70, up-regulated by NELF-depletion, whereas the majority of target genes showed decreased expression levels upon NELF RNAi. Our data reveal that the presence of stalled Pol II at this latter group of genes enhances gene expression by maintaining a permissive chromatin architecture around the promoter-proximal region, and that loss of Pol II stalling at these promoters is accompanied by a significant increase in nucleosome occupancy and a decrease in histone H3 Lys 4 trimethylation. These findings identify a novel, positive role for stalled Pol II in regulating gene expression and suggest that there is a dynamic interplay between stalled Pol II and chromatin structure.