Transcriptional silencing via promoter methylation of genes important for cell growth and differentiation plays a key role in myeloid leukemogenesis. We find that clinically achievable levels of 5-aza-2'-deoxycytidine (5-AZA-dC), a potent inhibitor of DNA methylation, can modify chromatin and restore the ability of tumor necrosis factor alpha (TNFalpha) to induce monocytic differentiation of the acute myeloid leukemia cells NB4 and U937. Although 5-AZA-dC cannot fully induce differentiation, we show that 5-AZA-dC acts directly on TNFalpha-responsive promoters to facilitate TNFalpha-induced transcriptional pathways leading to differentiation. 5-AZA-dC regulates the expression of Dif-2, a TNFalpha target gene, by deacetylating chromatin domains in a methylation-dependent manner. Chromatin immunoprecipitation analyses of the Dif-2 promoter show histone hyperacetylation and a recruitment of the nuclear factor-kappaB transcription factor in response to 5-AZA-dC. Furthermore, 5-AZA-dC plus TNFalpha enhances the level of phosphorylated RNA Pol II at the Dif-2 promoter via synergistic recruitment of TFIIH. We conclude that nonspecific changes in chromatin can allow a specific transcriptional inducer to overcome blocks in leukemic cell differentiation. Our results support the concept of low doses of 5-AZA-dC acting in combination with other agents to target epigenetic changes that drive malignant growth in leukemic cells. [Cancer Res 2009;69(1):55-64].