Tax1 of human T-cell leukemia virus type 1 (HTLV-1) activates viral transcription dependent upon three 21-bp enhancer elements in the long terminal repeat. Difficulties in detecting any association of Tax1 with the viral enhancer have hampered elucidation of the molecular mechanisms of Tax1-mediated transcriptional activation. By constructing a fusion protein with the heterologous DNA-binding domain of yeast GAL4, Tax1 was shown to be a potent transcriptional activator dependent on the presence of GAL4-binding sites. Deletions of the Tax1 portion of the fusion protein revealed that almost the entire region of Tax1 (amino acids 2-337) is required for activation, and the activity correlated well with that of the viral enhancer. The GAL/Tax1 mutant lacking 41 residues of the C-terminus of Tax1. GAL/Tax1(2-312). was inactive for the viral enhancer, but activity was recovered by adding the heterologous activation domain of herpes simplex virus VP16. These results indicate that Tax1 has two distinct but overlapping functional domains for transcriptional activation and for enhancer specificity. Thus, Tax1 is thought to be a transcription factor acting in the enhancer complex rather than as a catalytic or allosteric modifier of pre-existing cellular transcription factors.