Herpesviruses are ubiquitous pathogens that cause a wide range of disease. Upon nuclear entry, their genomes associate with histones and chromatin modifying enzymes that regulate the progression of viral transcription and outcome of infection. While the composition and modification of viral chromatin has been extensively studied on bulk populations of infected cells by chromatin immunoprecipitation, this key regulatory process remains poorly defined at single-genome resolution. Here we use high-resolution quantitative imaging to investigate the spatial proximity of canonical and variant histones at individual Herpes Simplex Virus 1 (HSV-1) genomes within the first 90 minutes of infection. We identify significant population heterogeneity in the stable enrichment and spatial proximity of canonical histones (H2A, H2B, H3.1) at viral DNA (vDNA) relative to established promyelocytic leukaemia nuclear body (PML-NB) host factors that are actively recruited to viral genomes upon nuclear entry. We show the replication-independent histone H3.3/H4 chaperone Daxx to cooperate with PML to mediate the enrichment and spatial localization of variant histone H3.3 at vDNA that limits the rate of HSV-1 genome decompaction to restrict the progress of immediate-early (IE) transcription. This host response is counteracted by the viral ubiquitin ligase ICP0, which degrades PML to disperse Daxx and variant histone H3.3 from vDNA to stimulate the progression of viral genome expansion, IE transcription, and onset of HSV-1 replication. Our data support a model of intermediate and sequential histone assembly initiated by Daxx that limits the rate of HSV-1 genome decompaction independently of the stable enrichment of histones H2A and H2B at vDNA required to facilitate canonical nucleosome assembly. We identify HSV-1 genome decompaction upon nuclear infection to play a key role in the initiation and functional outcome of HSV-1 lytic infection, findings pertinent to the transcriptional regulation of many nuclear replicating herpesvirus pathogens.