Histone modification is an important mechanism regulating both gene expression and the establishment and maintenance of cellular phenotypes during development. Regulation of histone acetylation via histone acetylases and deacetylases (HDACs) appears to be particularly crucial in determining gene expression patterns. In this study we explored the effect of HDAC inhibition on the life cycle of the human pathogen Giardia lamblia, a highly reduced parasitic protozoan characterized by minimized cellular processes. We found that the HDAC inhibitor FR235222 increased the level of histone acetylation and induced transcriptional regulation of approximately 2% of genes in proliferating and encysting parasites. In addition, our analyses showed that the levels of histone acetylation decreased during differentiation into cysts, the infective stage of the parasite. Importantly, FR235222 treatment during encystation reversed this histone hypo-acetylation and potently blocked the formation of cysts. These results provide the first direct evidence for epigenetic regulation of gene expression in this simple eukaryote. This suggests that regulation of histone acetylation is involved in the control of Giardia stage differentiation, and identifies epigenetic mechanisms as a promising target to prevent Giardia transmission.