Chromodomain-helicase-DNA-binding protein 1 (CHD1) remodels chromatin by translocating nucleosomes along DNA, but its mechanism remains poorly understood. We use single-molecule fluorescence experiments to clarify the mechanism by which yeast CHD1 (Chd1p) remodels nucleosomes. We find that binding of ATP to Chd1p induces transient unwrapping of the DNA on the exit side of the nucleosome, facilitating nucleosome translocation. ATP hydrolysis is required to induce nucleosome translocation. The unwrapped DNA after translocation is then rewrapped after the release of the hydrolyzed nucleotide and phosphate, revealing that each step of the ATP hydrolysis cycle is responsible for a distinct step of nucleosome remodeling. These results show that Chd1p remodels nucleosomes via a mechanism that is unique among the other ATP-dependent chromatin remodelers.