The transcription factor GATA-1 is a key regulator of erythroid-cell differentiation and survival. We have previously shown that the transcriptional cofactor CREB-binding protein (CBP) binds to the zinc finger domain of GATA-1, markedly stimulates the transcriptional activity of GATA-1, and is required for erythroid differentiation. Here we report that CBP, but not p/CAF, acetylates GATA-1 at two highly conserved lysine-rich motifs present at the C-terminal tails of both zinc fingers. Using [3H]acetate labelling experiments and anti-acetyl lysine immunoprecipitations, we show that GATA-1 is acetylated in vivo at the same sites acetylated by CBP in vitro. In addition, we show that CBP stimulates GATA-1 acetylation in vivo in an E1A-sensitive manner, thus establishing a correlation between acetylation and transcriptional activity of GATA-1. Acetylation in vitro did not alter the ability of GATA-1 to bind DNA, and mutations in either motif did not affect DNA binding of GATA-1 expressed in mammalian cells. Since certain functions of GATA-1 are revealed only in an erythroid environment, GATA-1 constructs were examined for their ability to trigger terminal differentiation when introduced into a GATA-1-deficient erythroid cell line. We found that mutations in either acetylation motif partially impaired the ability of GATA-1 to induce differentiation while mutations in both motifs abrogated it completely. Taken together, these data indicate that CBP is an important cofactor for GATA-1 and suggest a novel mechanism in which acetylation by CBP regulates GATA-1 activity in erythroid cells.