Sequestration of the transcriptional coactivator CREB-binding protein (CBP), a histone acetyltransferase, has been implicated in the pathogenesis of polyglutamine expansion neurodegenerative disease. We used a Drosophila model to demonstrate that polyglutamine-induced neurodegeneration is accompanied by a defect in histone acetylation and a substantial alteration in the transcription profile. Furthermore, we demonstrate complete functional and morphological rescue by up-regulation of endogenous Drosophila CBP (dCBP). Rescue of the degenerative phenotype is associated with eradication of polyglutamine aggregates, recovery of histone acetylation, and normalization of the transcription profile. These findings suggest that histone acetylation is an early target of polyglutamine toxicity and indicate that transcriptional dysregulation is an important part of the pathogenesis of polyglutamine-induced neurodegeneration.