Proper gene expression requires coordinated interplay among transcriptional coactivators, transcription factors and the general transcription machinery. We report here that MSL1, a central component of the dosage compensation complex in Drosophila melanogaster and Drosophila virilis, displays evolutionarily conserved sex-independent binding to promoters. Genetic and biochemical analyses reveal a functional interaction of MSL1 with CDK7, a subunit of the Cdk-activating kinase (CAK) complex of the general transcription factor TFIIH. Importantly, MSL1 depletion leads to decreased phosphorylation of Ser5 of RNA polymerase II. In addition, we demonstrate that MSL1 is a phosphoprotein, and transgenic flies expressing MSL1 phosphomutants show mislocalization of the histone acetyltransferase MOF and histone H4 K16 acetylation, thus ultimately causing male lethality due to a failure of dosage compensation. We propose that, by virtue of its interaction with components of the general transcription machinery, MSL1 exists in different phosphorylation states, thereby modulating transcription in flies.