Transcriptional regulation by heterodimers of thyroid hormone receptor (TR) and the 9-cis retinoid X receptor (RXR) is a highly complex process involving a large number of accessory factors, as well as chromatin remodeling. We have used a biochemical approach, including an in vitro chromatin assembly and transcription system that accurately recapitulates ligand- and activation function (AF)-2-dependent transcriptional activation by TRbeta/RXRalpha heterodimers, as well as in vitro chromatin immunoprecipitation assays, to study the mechanisms of TRbeta-mediated transcription with chromatin templates. Using this approach, we show that chromatin is required for robust ligand-dependent activation by TRbeta. We also show that the binding of liganded TRbeta to chromatin induces promoter-proximal chromatin remodeling and histone acetylation, and that histone acetylation is correlated with increased TRbeta-dependent transcription. Additionally, we find that steroid receptor coactivators (SRCs) and p300 function synergistically to stimulate TRbeta-dependent transcription, with multiple functional domains of p300 contributing to its coactivator activity with TRbeta. A major conclusion from our experiments is that the primary role of the SRC proteins is to recruit p300/cAMP response element binding protein-binding protein to hormone-regulated promoters. Together, our results suggest a multiple step pathway for transcriptional regulation by liganded TRbeta, including chromatin remodeling, recruitment of coactivators, targeted histone acetylation, and recruitment of the RNA polymerase II transcriptional machinery. Our studies highlight the functional importance of chromatin in transcriptional control and further define the molecular mechanisms by which the SRC and p300 coactivators facilitate transcriptional activation by liganded TRbeta.