Alga-derived lipids represent an attractive potential source of biofuels. However, lipid accumulation in algae is a stress response tightly coupled to growth arrest, thereby imposing a major limitation on productivity. To identify transcriptional regulators of lipid accumulation, we performed an integrative chromatin signature and transcriptomic analysis to decipher the regulation of lipid biosynthesis in the alga Chlamydomonas reinhardtii. Genome-wide histone modification profiling revealed remarkable differences in functional chromatin states between the algae and higher eukaryotes and uncovered regulatory components at the core of lipid accumulation pathways. We identified the transcription factor, PSR1, as a pivotal switch that triggers cytosolic lipid accumulation. Dissection of the PSR1-induced lipid profiles corroborates its role in coordinating multiple lipid-inducing stress responses. The comprehensive maps of functional chromatin signatures in a major clade of eukaryotic life and the discovery of a transcriptional regulator of algal lipid metabolism will facilitate targeted engineering strategies to mediate high lipid production in microalgae.