Chromatin and associated regulatory proteins regulate gene expression in the natural environment of the intact cell nucleus. Specific combinations of DNA-binding transcription factors and recruited coregulatory proteins alter the conformation of chromatin at promoters and enhancers of target genes to stimulate or repress transcription. The dynamic nature of the regulatory proteins active in these processes allows the cell to modulate gene expression very rapidly, an important feature in many physiological processes. Live cell imaging and photobleaching studies of fluorescently-tagged proteins reveal that many transcription factors and other chromatin-associated proteins rapidly move through the nucleoplasm. Transcription factors also transiently interact with specific regulatory sequences in chromatin, suggesting that gene activation does not require the formation of stable long-lived regulatory complexes on the chromatin. In this review we discuss how dynamic interactions allow transcriptional regulatory proteins find their targets within the nucleus, alter target chromatin structure, and modulate physiological gene expression.