Explaining the determinants involved in regulating the equilibrium between different chromatin structural states is fundamental to understanding differential gene expression. Histone variant H2A.Z is essential to chromatin architecture in higher eukaryotes but its role has not yet been explained. We show here that H2A.Z facilitates the intramolecular folding of nucleosomal arrays while simultaneously inhibiting the formation of highly condensed structures that result from intermolecular association. This makes a case for H2A.Z playing a fundamental role in creating unique chromatin domains poised for transcriptional activation. These results provide new insights into understanding how chromatin fiber dynamics can be altered by core histone variants to potentially regulate genomic function.