Transcription factor (TF) binding to its DNA target site plays an essential role in gene regulation. The location, orientation and spacing of transcription factor binding sites (TFBSs) also affect regulatory function of the TF. However, how nucleosomal context of TFBSs influences TF binding and subsequent gene regulation remains to be elucidated. Using genome-wide nucleosome positioning and TF binding data in budding yeast, we found that binding affinities of TFs to DNA tend to decrease with increasing nucleosome occupancy of the associated binding sites. We further demonstrated that nucleosomal context of binding sites is correlated with gene regulation of the corresponding TF. Nucleosome-depleted TFBSs are linked to high gene activity and low expression noise, whereas nucleosome-covered TFBSs are associated with low gene activity and high expression noise. Moreover, nucleosome-covered TFBSs tend to disrupt coexpression of the corresponding TF target genes. We conclude that nucleosomal context of binding sites influences TF binding affinity, subsequently affecting the regulation of TFs on their target genes. This emphasizes the need to include nucleosomal context of TFBSs in modeling gene regulation.