The transcription factor GATA-1 and its cofactor, friend of GATA-1 (FOG-1), are essential for normal erythroid development. FOG-1 physically interacts with GATA-1 to augment or inhibit its activity. The mechanisms by which FOG-1 regulates GATA-1 function are unknown. By using an assay that is based on the phenotypic rescue of a GATA-1-null erythroid cell line, we found that a conditional form of GATA-1 (GATA-1-ER) strongly induced histone acetylation at the β-major globin promoter in vivo, consistent with previous results. In contrast, GATA-1 bearing a point mutation that impairs FOG-1 binding [GATA-1(V205M)-ER] failed to induce high levels of histone acetylation at this site. However, at DNase I-hypersensitive site (HS)3 of the β-globin locus control region, GATA-1-induced histone acetylation was FOG-1-independent. Because the V205M mutation does not disrupt GATA-1 binding to DNA templates in vitro, we were surprised to find that in vivo GATA-1(V205M)-ER fails to bind the β-globin promoter. However, at HS3, DNA binding by GATA-1 was FOG-1-independent, thus correlating histone acetylation with GATA-1 occupancy. Examination of additional GATA-1-dependent regulatory elements showed that the interaction with FOG-1 is required for GATA-1 occupancy at select sites, such as HS2, but is dispensable at others, including the FOG-1-independent GATA-1 target gene EKLF. Remarkably, at the GATA-2 gene, which is repressed by GATA-1, interaction with FOG-1 was dispensable for GATA-1 occupancy and was required for transcriptional inhibition and histone deacetylation. These results indicate that FOG-1 employs distinct mechanisms when cooperating with GATA-1 during transcriptional activation and repression.