The proinflammatory cytokines IL-1β and IFN-γ decrease functional islet β-cell mass in part through the increased expression of specific genes, such as inducible nitric oxide synthase (iNOS). Dysregulated iNOS protein accumulation leads to overproduction of nitric oxide, which induces DNA damage, impairs β-cell function, and ultimately diminishes cellular viability. However, the transcriptional mechanisms underlying cytokine-mediated expression of the iNOS gene are not completely understood. Herein, we demonstrated that individual mutations within the proximal and distal nuclear factor-κB sites impaired cytokine-mediated transcriptional activation. Surprisingly, mutating IFN-γ–activated site (GAS) elements in the iNOS gene promoter, which are classically responsive to IFN-γ, modulated transcriptional sensitivity to IL-1β. Transcriptional sensitivity to IL-1β was increased by generation of a consensus GAS element and decreased correspondingly with 1 or 2 nucleotide divergences from the consensus sequence. The nuclear factor-κB subunits p65 and p50 bound to the κB response elements in an IL-1β–dependent manner. IL-1β also promoted binding of serine-phosphorylated signal transducer and activator of transcription-1 (STAT1) (Ser727) but not tyrosine-phosphorylated STAT1 (Tyr701) to GAS elements. However, phosphorylation at Tyr701 was required for IFN-γ to potentiate the IL-1β response. Furthermore, coactivator p300 and coactivator arginine methyltransferase were recruited to the iNOS gene promoter with concomitant displacement of the coactivator CREB-binding protein in cells exposed to IL-1β. Moreover, these coordinated changes in factor recruitment were associated with alterations in acetylation, methylation, and phosphorylation of histone proteins. We conclude that p65 and STAT1 cooperate to control iNOS gene transcription in response to proinflammatory cytokines by a coactivator exchange mechanism. This increase in transcription is also associated with signal-specific chromatin remodeling that leads to RNA polymerase II recruitment and phosphorylation.