Posttranslational modification of histones regulates transcription but the exact role that acetylation of specific lysine residues plays in biological processes in vivo is still not clearly understood. To assess the contribution of different histone modifications to transcriptional activation in vivo, we determined the acetylation patterns on the ecdysone induced Eip74EF and Eip75B genes in Drosophila melanogaster larvae by chromatin immunoprecipitation. We found that acetylation of histone H3 lysine 23 is localized to promoters and correlates with endogenous ecdysone induced gene activation. In contrast, acetylation of lysines 8, 12 and 16 of histone H4 and lysine 9 of histone H3 showed minor differences in their distribution on the regulatory and transcribed regions tested, and had limited or no correlation with ecdysone induced transcriptional activity. We found that dCBP, which is encoded by the nejire gene, acetylates H3 lysine 23 in vivo, and silencing of nejire leads to reduced expression of the Eip74EF and Eip75B genes. Our results suggest that acetylation of specific lysine residues of histones contribute specifically to the dynamic regulation of transcription. Furthermore, along with previous studies identify CBP dependent H3 lysine 23 acetylation as an evolutionarily conserved chromatin modification involved in steroid induced gene activation.