We have examined the role of histone acetylation in the very earliest steps of differentiation of mouse embryonic stem cells in response to withdrawal of leukemia inhibitory factor (LIF) as a differentiation signal. The cells undergo dramatic changes in morphology and an ordered program of gene expression changes representing differentiation to all three germ layers over the first three to five days of LIF withdrawal. We observed a global increase in acetylation on histone H4 and to a lesser extent on histone H3 over this time period. Treatment of the cells with Trichostatin A (TSA), a histone deacetylase inhibitor, induced changes in morphology, gene expression, and histone acetylation that mimicked differentiation induced by withdrawal of LIF. We examined localized histone acetylation in the regulatory regions of genes that were transcriptionally either active in undifferentiated cells, induced during differentiation, or inactive under all treatments. There was striking concordance in the histone acetylation patterns of specific genes induced by both TSA and LIF withdrawal. Increased histone acetylation in local regions correlated best with induction of gene expression. Finally, TSA treatment did not support the maintenance or progression of differentiation. Upon removal of TSA, the cells reverted to the undifferentiated phenotype. We concluded that increased histone acetylation at specific genes played a role in their expression, but additional events are required for maintenance of differentiated gene expression and loss of the pluripotent state.