In Saccharomyces cerevisiae, many osmotically inducible genes are regulated by the Sko1p-Ssn6p-Tup1p complex. On osmotic shock, the MAP kinase Hog1p associates with this complex, phosphorylates Sko1p, and converts it into an activator that subsequently recruits Swi/Snf and SAGA complexes. We have found that phospholipase C (Plc1p encoded by PLC1) is required for derepression of Sko1p-Ssn6p-Tup1p-controlled osmoinducible genes upon osmotic shock. Although plc1Delta mutation affects the assembly of the preinitiation complex after osmotic shock, it does not affect the recruitment of Hog1p and Swi/Snf complex at these promoters. However, Plc1p facilitates osmotic shock-induced recruitment of the SAGA complex. Like plc1Delta cells, SAGA mutants are osmosensitive and display compromised expression of osmotically inducible genes. The reduced binding of SAGA to Sko1p-Ssn6p-Tup1p-repressed promoters in plc1Delta cells does not correlate with reduced histone acetylation. However, SAGA functions at these promoters to facilitate recruitment of the TATA-binding protein. The results thus provide evidence that Plc1p and inositol polyphosphates affect derepression of Sko1p-Ssn6p-Tup1p-controlled genes by a mechanism that involves recruitment of the SAGA complex and TATA-binding protein.