The effect of histone H1 on transcription by bacteriophage T7 RNA polymerase was examined using reconstituted chromatin templates. A 3.8 kb linear DNA template consisting of a specific transcription promoter for T7 RNA polymerase placed upstream of 18 tandem repeats of a 207 bp nucleosome positioning sequence derived from the 5S rRNA gene of Lytechinus variegatus was used as a template for chromatin reconstitution. Regularly spaced arrays of nucleosome cores were assembled onto this DNA template from donor histone octamers by salt step dialysis. Histone H1 was incorporated onto free DNA or reconstituted chromatin templates and double label transcription assays were performed. The experiments indicated that histone H1 has a strong inhibitory effect on both transcription initiation and elongation. These effects are especially pronounced on chromatin templates, where both transcription initiation and elongation are virtually halted. The inhibition of transcription elongation appears to result from a dramatic increase in premature termination of transcripts. These experiments indicate that assembly of histone H1 into chromatin can result in structures which are completely repressed with respect to transcription.