Human positive cofactor (PC4) acts as a general coactivator for activator-dependent transcription by RNA polymerase II. Here we show that PC4 coactivator function, in contrast to basal (activator-independent) transcription, is dependent both on TATA binding protein (TBP)-associated factors (TAFs) in TFIID and on TFIIH. Surprisingly, PC4 strongly represses transcription initiation by minimal preinitiation complexes in the absence of TAFs and TFIIH, while simultaneously promoting the formation of these complexes. Furthermore, TFIIH and TAFII250, the largest subunit of TFIID, can both phosphorylate PC4. These results provide evidence for an inactive, PC4-induced intermediate in preinitiation complex assembly and point to TFIIH and TAF requirements for its progression into a functional preinitiation complex. Thus PC4 coactivator activity is realized in a stepwise series of events reminiscent of prokaryotic activation pathways involving conversion of inactive RNA polymerase-promoter complexes to an initiation-competent state.