Man, every time I set up mysql it takes me half an hour to google up all the documentation of how to make it just work™ with utf-8 instead of the god forsaken latin1 default. So here it is once and for all.

Server my.cnf should contain:

[mysqld]
collation_server=utf8_general_ci
character_set_server=utf8

The location of my.cnf varies depending on how you install it. dev.mysql.com has a nice summary of how my.cnf is looked up.

Since I use homebrew my location is /usr/local/var/mysql/my.cnf. Binary installations differ.

Server config variables are described under Server System Variables

Client configuration goes in ~/.my.cnf:

[client]
default-character-set=utf8

Client config variables are described under mysql Options

You can check the status of these with SHOW VARIABLES

Finally, as a reminder for homebrew users, if you use the com.mysql.mysqld launchd plist that comes with the homebrew formula then you will want to start and stop the server via launchctl:

launchctl stop com.mysql.mysqld
...
launchctl start com.mysql.mysqld