Dot1 (disruptor of telomeric silencing-1), the histone H3 lysine 79 (H3K79) methyltransferase, is conserved throughout evolution, and its deregulation is found in human leukemias. Here, we provide evidence that acetylation of histone H4 allosterically stimulates yeast Dot1 in a manner distinct from but coordinating with histone H2B ubiquitination (H2BUb). We further demonstrate that this stimulatory effect is specific to acetylation of lysine 16 (H4K16ac), a modification central to chromatin structure. We provide a mechanism of this histone cross-talk and show that H4K16ac and H2BUb play crucial roles in H3K79 di- and trimethylation in vitro and in vivo. These data reveal mechanisms that control H3K79 methylation and demonstrate how H4K16ac, H3K79me, and H2BUb function together to regulate gene transcription and gene silencing to ensure optimal maintenance and propagation of an epigenetic state.