GAL4 derivatives containing an activation domain alleviated repression of a promoter during nucleosome assembly. A GAL4 derivative lacking an activation domain stably bound the promoter during nucleosome assembly but was not sufficient to preserve promoter function. The activation domain of GAL4 derivatives was essential for preserving promoter function, and thus the transcriptional stimulatory activity attributable to these activation domains increased dramatically during nucleosome assembly. Furthermore, promoter-bound activation domains allowed the formation of preinitiation complexes after nucleosome assembly. Finally, GAL4 derivatives containing activation domains significantly stimulated transcription through bacterially produced yeast TFIID only from nucleosome-assembled templates. These data indicate that acidic activation domains stimulate transcription by enhancing the ability of basal transcription factors to compete with nucleosomes for occupancy of the promoter.