Chromatin regulates gene expression and therefore plays a key role in developmental processes and in the etiology of various diseases including Cancer. Nuclear protein such as histone H1 and HMGs have been shown to bind to, and alter the properties of the chromatin fiber. Changes in the expression of these architectural proteins are linked to various developmental defects and to various diseases including cancer. However, in spite of numerous studies, the mechanism of action, and the exact cellular function of these proteins remains one of the most perplexing aspects of chromatin biology. We are using a multidisciplinary approach, including analyses of genetically modified mice, to gain a comprehensive understanding of the biological function and mechanism of action of the HMGN proteins, the only nuclear proteins that bind specifically to the nucleosome core particle, the building block of the chromatin fiber. Biochemical and cytological approaches were used to demonstrate that the binding of these proteins to chromatin alters the higher-order chromatin structure and affect the cellular transcription profile. Using immunochemical analysis and fluorescent photobleaching imaging of living cells, we demonstrated that the binding of HMGNs and H1 to chromatin is dynamic rather than static, a finding that led to new insights into the kinetics of the intranuclear organization of most nuclear proteins. By microinjecting proteins into living cells expressing tagged proteins, we demonstrated that H1 and HMGs form a network of competitive interactions on nucleosomes, a novel concept that is relevant to understanding functional redundancy among related proteins and cellular homeostatic mechanisms. We have discovered a new chromatin binding protein named HMGN5/NSBP1, which we show that it binds specifically to euchromatin, the genomic region containing transcriptionally active genes. We observed that this protein changes the global structure of chromatin and demonstrated that the C-terminal region of HMGN5 specifically interacts with the C-terminal region of H1. These studies provide fundamental insights into the molecular mechanisms governing chromatin dynamics. By analyzing Hmgn1-/- cells and by studying in vitro nucleosome reconstitution systems we found that H1 and HMGNs affect the levels of histone posttranslational modifications, thereby identifying an additional mechanism that regulates the levels of these epigenetic markers. Indeed mice and cells lacking HMGN1 are more susceptible to various stresses such as heat ahock and DNA damage. The hypersensitivity to stress can be directly related to HMGN-dependent changes in histone modifications. Alterations in the levels of posttranslational modifications of histones have been linked to multiple biological processes including genetic instability and cancer. Our analyses of genetically modified mice and cells derived from these mice indicate that HMGN proteins play a role in the repair of damaged DNA and in the etiology of certain cancers. We find that loss of HMGN1 impairs the repair of both single stranded and double stranded DNA damage. The repair of the single stranded damage is impaired because the nucleotide excision repair (NER) cannot effectively access the damage sites. The repair of double stranded DNA breaks (DSB) is largely dependent on the action of the nuclear protein kinase ataxia-telangiectasia mutated (ATM). ATM regulates the activity of key molecules that affect tumorigenesis, including p53. We found that loss of HMGN1, or ablation of its ability to bind to chromatin, reduces the levels of DSB-induced ATM autophosphorylation and the activation of several ATM targets. HMGN1 alters the interaction of ATM with chromatin both prior to, and following the induction of DNA damage, and also enhances the DSB-induced acetylation of Lys14 of histone H3 (H3K14). Treatment of cells with a histone deacetylase inhibitor bypasses the HMGN1 requirement for ATM activation. Thus, HMGN1 mediate the efficient activation of ATM by optimizing its chromatin interactions both prior to and after DSBs formation. Our studies identify a new mediator of ATM activation and demonstrate a direct link between the steady-state intranuclear organization of ATM and the kinetics of its activation following DNA damage. As chromatin binding proteins, HMGNs affect developmental processes. We found that the expression of HMGN proteins is developmentally regulated and that during development the expression of these proteins is severely down regulated. Loss of HMGN1 affects the in vitro differentiation of chondrocytes. This effect is due to misexpression of Sox-9, a key regulator of chondrocyte differentiation. HMGNs bind to the chromatin of Sox 9 gene and affect its expression. Likewise, we find that HMGN1 is expressed in the hair bulge region and loss of HMGN1 protein alters the hair cycle. We also found that HMGN1 is highly expressed in the basal layer of the epithelium, including the corneal epithelium. Loss of HMGN1 affects the organization of the corneal epithelium. In mouse embryonic cells, misexpression of HMGN affects several differentiation pathways. The results suggest that HMGNs regulate transcription levels of specific genes. Indeed our recent unpublished studies indicate that either down regulation or upregulation of HMGN in cells alters the cellular transcription profile. Towards further understanding the molecular mechanisms whereby HMGNs affect the cellular transcription profile we have initiated several collaborations aimed at elucidating the genome wide global organization of HMGNs. The results indicate that genome-wide, HMGNs are associated with chromatin regulatory regions. Taken together, our findings with genetically engineered mice and cells and our previous biochemical findings, indicate that HMGNs are fine tuners of chromatin function and that proper differentiation and proper cellular function requires regulated expression of HMGN.