Transcription in eukaryotic cells has been described as quantal, with pulses of messenger RNA produced in a probabilistic manner. This description reflects the inherently stochastic nature of gene expression, known to be a major factor in the heterogeneous response of individual cells within a clonal population to an inducing stimulus. Here we show in Saccharomyces cerevisiae that stochasticity (noise) arising from transcription contributes significantly to the level of heterogeneity within a eukaryotic clonal population, in contrast to observations in prokaryotes, and that such noise can be modulated at the translational level. We use a stochastic model of transcription initiation specific to eukaryotes to show that pulsatile mRNA production, through reinitiation, is crucial for the dependence of noise on transcriptional efficiency, highlighting a key difference between eukaryotic and prokaryotic sources of noise. Furthermore, we explore the propagation of noise in a gene cascade network and demonstrate experimentally that increased noise in the transcription of a regulatory protein leads to increased cell-cell variability in the target gene output, resulting in prolonged bistable expression states. This result has implications for the role of noise in phenotypic variation and cellular differentiation.