YY1 is a transcription factor that can activate or repress transcription of a variety of genes, and is involved in several development processes. We have recently shown that YY1 is a repressor of transcription in differentiated H9C2 cells and in neonatal cardiac myocytes, but an activator of transcription in undifferentiated H9C2 cells. We now present a detailed analysis of the functional domains of YY1 when it is acting as a repressor or an activator and identify the mechanism whereby its function is regulated in the differentiation of H9C2 cells. We show that HDAC5 is localized to the cytoplasm in undifferentiated H9C2 cells and that this localization is dependent on CaMKIV and/or PKD. In differentiated cells, HDAC5 is nuclear and interacts with YY1. Finally, we show that HDAC5 localization in differentiated cells is dependent on PP2A. Our results suggest that a signaling mechanism that involves CaMKIV/PKD and PP2A controls YY1 function through regulation of HDAC5, and is important in the maintenance of muscle differentiation.