The estrogen receptor plays an important role in breast cancer progression. Proline-, glutamic acid-, and leucine-rich protein 1 (PELP1), also called modulator of nongenomic activity of estrogen receptor (MNAR), a novel coactivator of estrogen receptor, modulates estrogen receptor transactivation functions. The mechanisms by which PELP1 modulates estrogen receptor genomic functions is not known. Here, using biochemical and scanning confocal microscopic analysis, we have demonstrated nuclear localization and functional implications of PELP1. Subnuclear fractionation showed PELP1 association with chromatin and nuclear matrix fractions. Ligand stimulation promoted recruitment of PELP1 to 17beta-estradiol responsive promoters, its colocalization with acetylated H3, and increased PELP1-associated histone acetyltransferase enzymatic activity. Far Western analysis revealed that PELP1 interacts with histone 1 and 3, with more preference toward histone 1. Using deletion analysis, we have identified the PELP1 COOH-terminal region as the histone 1 binding site. The PELP1 mutant lacking histone 1-binding domain acts as a dominant-negative and blocks estrogen receptor alpha-mediated transcription. Chromatin immunoprecipitation analysis showed a cyclic association and dissociation of PELP1 with the promoter, with recruitment of histone 1 and PELP1 occurring in opposite phases. PELP1 overexpression increased the micrococcal nuclease sensitivity of estrogen response element-containing nucleosomes. Our results provide novel insights about the transcription regulation of PELP1 and suggest that PELP1 participates in chromatin remodeling activity via displacement of histone 1 in cancer cells.