The SIN1 gene was initially identified because mutations in SIN1 bypass the need for SWI1 to activate transcription of the yeast HO gene. We show here that transcription of HO in swi1 sin1 cells efficiently utilizes the normal start site. We have cloned SIN1 and found that it is identical to the previously identified gene SPT2, mutations in which allow transcription from certain mutated regulatory regions. The predicted SIN1/SPT2 protein has a distinctive amino acid composition (45% charged residues, 25% basic and 20% acidic) and has similarity to the mammalian HMG1 protein, a nonhistone component of chromatin. We show that SIN1 is concentrated in the nucleus and binds to DNA with little or no sequence specificity in vitro. It thus exhibits properties of an HMG protein. Addition of random DNA segments to a test promoter alters regulation by SIN1 in a manner similar to addition of a segment from the HO upstream region. Functional analysis of certain SIN1 mutations suggests that SIN1 may be part of a multiprotein complex. On the basis of these results, we propose that SIN1 is a nonhistone component of chromatin which creates the proper context for transcription. Because sin1 mutants exhibit increased loss of chromosome III, SIN1 may also play a role in fidelity of chromosome segregation.