HIV gene expression is subject to a transcriptional checkpoint, whereby negative transcription elongation factors induce an elongation block that is overcome by HIV Tat protein in conjunction with P-TEFb. P-TEFb is a cyclin dependent kinase that catalyzes Tat-dependent phosphorylation of Ser-5 of the Pol II C-terminal domain (CTD). Ser-5 phosphorylation confers on the CTD the ability to recruit the mammalian mRNA capping enzyme (Mcel) and stimulate its guanylyltransferase activity. Here we show that Tat spearheads a second and novel pathway of capping enzyme recruitment and activation via a direct physical interaction between the C-terminal domain of Tat and Mcel. Tat stimulates the guanylyl transferase and triphosphatase activities of Mcel and thereby enhances the otherwise low efficiency of cap formation on a TAR stem-loop RNA. Our findings suggest that multiple mechanisms exist for coupling transcription elongation and mRNA processing.