A major challenge in biology is to understand how genetic information is interpreted to direct the formation of specialized tissues within a multicellular organism. During differentiation, changes in chromatin structure and nuclear organization establish heritable patterns of gene expression in response to signals. Epigenetic states can be broadly divided into three categories: euchromatin, constitutive heterochromatin and facultative hetereochromatin. Although the static epigenetic profiles of expressed and silent loci are relatively well characterized, less is known about the transition between active and repressed states. Furthermore, it is important to expand on localized models of chromatin structure at specific genetic addresses to examine the entire nucleus. Changes in nuclear organization, replication timing and global chromatin modifications should be integrated when attempting to describe the epigenetic signature of a given cell type. It is also crucial to examine the temporal aspect of these changes. In this context, the capacity for cellular differentiation reflects both the repertoire of available transcription factors and the accessibility of cis-regulatory elements, which is governed by chromatin structure. Understanding this interplay between epigenetics and transcription will help us to understand differentiation pathways and, ultimately, to manipulate or reverse them.