Dosage compensation ensures equal expression of X-linked genes in males and females. In Drosophila, equalization is achieved by hypertranscription of the male X chromosome. This process requires an RNA/protein containing dosage compensation complex (DCC). Here we use RNA interference of individual DCC components to define the order of complex assembly in Schneider cells. We show that interaction of MOF with MSL-3 leads to specific acetylation of MSL-3 at a single lysine residue adjacent to one of its chromodomains. We observe that localization of MSL-3 to the X chromosome is RNA dependent and acetylation sensitive. We find that the acetylation status of MSL-3 determines its interaction with roX2 RNA. Furthermore, we find that RPD3 interacts with MSL-3 and that MSL-3 can be deacetylated by the RPD3 complex. We propose that regulated acetylation of MSL-3 may provide a mechanistic explanation for spreading of the dosage compensation complex along the male X chromosome.