At active human genes, the +1 nucleosome is located downstream of the RNA polymerase II (RNA Pol II) pre-initiation complex (PIC). However, at inactive genes, the +1 nucleosome is found further upstream, at a promoter-proximal location. Here, we establish a model system to show that a promoter-proximal +1 nucleosome can reduce RNA synthesis in vivo and in vitro, and we analyze its structural basis. We find that the PIC assembles normally when the edge of the +1 nucleosome is located 18 base pairs (bp) downstream of the transcription start site (TSS). However, when the nucleosome edge is located further upstream, only 10 bp downstream of the TSS, the PIC adopts an inhibited state. The transcription factor IIH (TFIIH) shows a closed conformation and its subunit XPB contacts DNA with only one of its two ATPase lobes, inconsistent with DNA opening. These results provide a mechanism for nucleosome-dependent regulation of transcription initiation.