We are investigating the role of chromosomal proteins in determining the structure and regulating the function of chromatin. Cell free chromatin assembly systems and in vitro- reconstitution assays are used to determine the role of chromosomal proteins HMG-14 and HMG-17 in chromatin structure and nuclear function. These two proteins are the only nonhistone structural proteins known to specifically associate with the nucleosome core, which is the building block of the chromatin fiber. We found that incorporation of HMG-14/-17 into minichromosomes increases the transcriptional potential of these chromatin templates. In SV-40 minichromosmes the proteins enhance transcription by negating the repressive activity of the linker histone H1. Using point and deletion mutants of the proteins we found that the C-terminal region of the HMG- 14/-17 proteins is necessary for transcriptional activation and that this activation is associated with an unfolding of the chromatin fiber. Using 5-N-4 azidosalicyl cysteaminyl-2 thiopyridyl cross linking procedures we mapped the regions where specific residues of HMG-14 cross link to histones in nucleosomes. Residue 7 of HMG-14 interacts with histone H2B while residues 88 and 98 interact with the N-terminal tails of histone H3. We suggest that the C-terminal, activating domain, of HMG-14/-17 proteins interact with the amino terminal of histone H3 to unfold the higher order chromatin structure thereby facilitating access to the underlying DNA structure. Indeed, we find that HMG-14/-17 enhances not only the rate of transcription but also the rate of replication of a chromatin template. We also found that HMG- 14/-17 proteins are substrates for histone acetyl transferases. Thus, these acetyl transferases, some of which are also transcription factors, could modulate chromatin structure by modifying other proteins beside histones. During these studies we developed a new assay for PCAF and demonstrated that the enzyme is highly unstable. The enzymatic activities of PCAF can be stabilized by enzyme cofactors. In a separate study we identified the key elements involved in the transport of HMG proteins into the nucleus. Our studies raise the possibility that regulated nuclear transport of HMG-14/-17 may target these proteins to specific regions in the nucleus.