The yeast PHO5 promoter is a classical model for studying the role of chromatin in gene regulation. To enable biochemical dissection of the mechanism leading to PHO5 activation, we reconstituted the process in vitro. Positioned nucleosomes corresponding to the repressed PHO5 promoter state were assembled using a yeast extract-based in vitro system. Addition of the transactivator Pho4 yielded an extensive DNase I-hypersensitive site resembling induced PHO5 promoter chromatin. Importantly, this remodeling was energy dependent. In contrast, little or no chromatin remodeling was detected at the PHO8 or PHO84 promoter in this in vitro system. Only the PHO5 promoter harbors a high-affinity intranucleosomal Pho4 binding site (UASp) where Pho4 binding can compete with nucleosome formation, prompting us to test the importance of such competition for chromatin remodeling by analysis of UASp mutants in vivo. Indeed, the intranucleosomal location of the UASp element was critical, but not essential, for complete remodeling at the PHO5 promoter in vivo. Further, binding of just the Gal4 DNA binding domain to an intranucleosomal site could increase PHO5 promoter opening. These data establish an auxiliary role for DNA binding competition between Pho4 and histones in PHO5 promoter chromatin remodeling in vivo.