Promoter- and enhancer-binding factors appear to function by facilitating the transcription reaction as well as by counteracting chromatin-mediated repression (antirepression). We have examined the mechanism by which a hybrid activator, GAL4-VP16, is able to counteract histone H1-mediated repression by using both H1-DNA complexes and reconstituted H1-containing chromatin templates. The GAL4 DNA binding domain alone was sufficient to disrupt local H1-DNA interactions, but a transcriptional region was additionally necessary for antirepression. GAL4-VP16-mediated antirepression required an auxiliary factor, denoted as a co-antirepressor, which was partially purified from Drosophila embryos. We have found that the co-antirepressor activity was sensitive to digestion with RNase A. Moreover, total RNA from Drosophila embryos could partially substitute for the co-antirepressor fraction, which indicated that the co-antirepressor may function as a histone acceptor ("histone sink"). These findings suggest a model for gene activation in which sequence-specific transcription factors disrupt H1-DNA interactions at the promoter to facilitate transfer of H1 to a histone acceptor, which then allows access of the basal transcription factors to the DNA template.