As an inhibitor of cyclin-dependent kinases, p16^INK4A is an important tumour suppressor and inducer of cellular senescence that is often inactivated during the development of cancer by promoter DNA methylation. Using newly established lymphoblastoid cell lines (LCLs) expressing a conditional EBNA3C from recombinant EBV, we demonstrate that EBNA3C inactivation initiates chromatin remodelling that resets the epigenetic status of p16^INK4A to permit transcriptional activation: the polycomb-associated repressive H3K27me3 histone modification is substantially reduced, while the activation-related mark H3K4me3 is modestly increased. Activation of EBNA3C reverses the distribution of these epigenetic marks, represses p16^INK4A transcription and allows proliferation. LCLs lacking EBNA3A express relatively high levels of p16^INK4A and have a similar pattern of histone modifications on p16^INK4A as produced by the inactivation of EBNA3C. Since binding to the co-repressor of transcription CtBP has been linked to the oncogenic activity of EBNA3A and EBNA3C, we established LCLs with recombinant viruses encoding EBNA3A- and/or EBNA3C-mutants that no longer bind CtBP. These novel LCLs have revealed that the chromatin remodelling and epigenetic repression of p16^INK4A requires the interaction of both EBNA3A and EBNA3C with CtBP. The repression of p16^INK4A by latent EBV will not only overcome senescence in infected B cells, but may also pave the way for p16^INK4A DNA methylation during B cell lymphomagenesis.