CP27 is a novel gene involved in early vertebrate development that features a distinct expression pattern during development. The cp27 gene contains an open reading frame of 295 amino acids corresponding to a predicted molecular mass of 33kDa. Here we have characterized the CP27 promoter and performed a first analysis of CP27 function in development. To study cp27 gene regulation, we have examined its transcriptional activity, and identified transcription factor binding sites in the proximal promoter region. Promoter function analysis of the 5′ flanking region by progressive 5′ deletion mutations localized transcription repression elements. Functional studies indicated two function-cooperative CCAAT boxes and identified the NF-Y transcription factor as the CCAAT activator controlling transactivation of the CP27 promoter. The maintenance and differentiation of ES cells depends on the regulation of gene expression through the coordinated binding of transcription factors to regulatory promoter elements. One of the genes involved in embryonic development is the chromatin factor CP27. Here we report that CP27 gene expression in ES cells is controlled by CCAAT and E-box cis-acting regulatory elements and their corresponding transcription factors NF-Y and USF1. Specifically, USF1 interacts with the E-box of the cp27 proximal promoter and NF-Y interacts with the CCAAT-box. NF-Y and USF1 also interacted with each other and activated the cp27 promoter. Chromatin dynamics assume key functions in the lineage differentiation and gastrulation of bilaterian embryos. Here we demonstrate that a novel chromatin factor CP27 is required for mouse development, germ layer differentiation, and the formation of an archenteron. Loss of CP27 caused severely disturbed epiblast development and prolonged endoderm survival. cp27 Null mice expressed residual levels of the pluripotency factor Nanog and the variant histone H2A.Z. CP27 interacted with H2A.Z on a chromatin level, and a chromatin complex containing both CP27 and H2A.Z differentially bound to the Nanog promoter. Together, these findings suggest a direct link between CP27 and H2A.Z chromatin complex interactions and ES cell lineage specification via Nanog. Together, our data indicate that CP27 is chromatin factor involved in early embryonic development that is regulated by the universal transcription factor NF-Y in combination with the USF-1 enhancer.