Trimethylation of histone H3 lysine 27 (H3K27me3) by Polycomb repressive complex 2 (PRC2) is essential for transcriptional silencing of Polycomb target genes, whereas acetylation of H3K27 (H3K27ac) has recently been shown to be associated with many active mammalian genes. The Trithorax protein (TRX), which associates with the histone acetyltransferase CBP, is required for maintenance of transcriptionally active states and antagonizes Polycomb silencing, although the mechanism underlying this antagonism is unknown. Here we show that H3K27 is specifically acetylated by Drosophila CBP and its deacetylation involves RPD3. H3K27ac is present at high levels in early embryos and declines after 4 hours as H3K27me3 increases. Knockdown of E(Z) decreases H3K27me3 and increases H3K27ac in bulk histones and at the promoter of the repressed Polycomb target gene abd-A, suggesting that these indeed constitute alternative modifications at some H3K27 sites. Moderate overexpression of CBP in vivo causes a global increase in H3K27ac and a decrease in H3K27me3, and strongly enhances Polycomb mutant phenotypes. We also show that TRX is required for H3K27 acetylation. TRX overexpression also causes an increase in H3K27ac and a concomitant decrease in H3K27me3 and leads to defects in Polycomb silencing. Chromatin immunoprecipitation coupled with DNA microarray (ChIP-chip) analysis reveals that H3K27ac and H3K27me3 are mutually exclusive and that H3K27ac and H3K4me3 signals coincide at most sites. We propose that TRX-dependent acetylation of H3K27 by CBP prevents H3K27me3 at Polycomb target genes and constitutes a key part of the molecular mechanism by which TRX antagonizes or prevents Polycomb silencing.