How does a chameleon change color?

Chameleons cannot generate body heat by themselves, they change their skin color to maintain their body temperature. The outer layer of the chameleon skin is transparent. Under the outer layer, there are many layers with specialized cells known as CHROMATOPHORES.

Chromatophores at different skin layer contain different pigments. The chameleon has different types of chromatophores.

Xanthophores - yellow, Erythrophores - red, Iridophores - blue and Melanophores - brown.
A change in temperature and mood of a chameleon determines the color that is expressed and the color that contracts.

Dissimilar to different animals that change color, for example, the squid and octopus, chameleons don't change colors by collecting or scattering colors inside their skin cells, Rather, the reptiles depend on auxiliary changes that influence how light reflects off their skin.

Since chameleons can't generate their own particular body heat, changing the color of their skin is a method to keep up an ideal body temperature. ... The furthest layer of the chameleon's skin is straightforward. Underneath this are a few more layers of skin that contain specific cells called chromatophores.

Chameleons cover themselves in a wide range of ways yet most broadly by changing the color and example of their skin. Most chameleons can change color and they do this by extending or contracting cells in their skin that contain distinctive shades.