The generation of distinct cell types during development depends on the competence of progenitor populations to differentiate along specific lineages. Here we investigate the mechanisms that regulate competence of rodent cortical progenitors to differentiate into astrocytes in response to ciliary neurotrophic factor (CNTF). We found that fibroblast growth factor 2 (FGF2), which by itself does not induce astrocyte-specific gene expression, regulates the ability of CNTF to induce expression of glial fibrillary acidic protein (GFAP). FGF2 facilitates access of the STAT/CBP (signal transducer and activator of transcription/CRE binding protein) complex to the GFAP promoter by inducing Lys4 methylation and suppressing Lys9 methylation of histone H3 at the STAT binding site. Histone methylation at this site is specific to the cell's state of differentiation. In progenitors, the promoter is bound by Lys9-methylated histones, and in astrocytes, it is bound by Lys4-methylated histones, indicating that astrocyte differentiation in vivo involves this switch in chromatin state. Our observations indicate that extracellular signals can regulate access of transcription factors to genomic promoters by local chromatin modification, and thereby regulate developmental competence.