Molecular chaperones Hsp90 and Hsp70 control many signal transducers, including cyclin-dependent kinases and steroid receptors. The yeast heme-responsive transcriptional activator Hap1 is a native substrate of both Hsp90 and Hsp70. Hsp90 and Hsp70 are critical for the precise regulation of Hap1 activity by heme. Here, to decipher the molecular events underlying the actions of Hsp90 and Hsp70 in heme regulation, we purified various multichaperone-Hap1 complexes and characterized the complexes linked to Hap1 repression and activation by two-dimensional electrophoresis analysis. Notably, we found that in vitro Hap1 is associated continuously with Ssa and its co-chaperones, and this association is not weakened by heme. Heme enhances the interaction between Hap1 and Hsp90. In vivo, defective Ssa, Ydj1, or Sro9 function causes Hap1 derepression in the absence of heme, whereas defective Hsp90 function causes reduced Hap1 activity at high heme concentrations. These results show that continuous association of Hap1 with Ssa, Ydj1, and Sro9 confers Hap1 repression, whereas enhanced association of Hsp90 with the repressed Hap1-Ssa-Ydj1-Sro9 complex by heme causes Hap1 activation. This novel mechanism of chaperone action may operate to control the activity of other important signal transducers.