The HIV Tat protein is essential for productive infection and is a potent activator of viral gene expression. By constructing a genetic fusion between the aminoterminal DNA-binding domain of the lambda repressor (as a reporter for dimerization) and Tat, we show that Tat forms dimers in vivo. By deletion analysis and site-directed mutagenesis, we show that (i) the peptide encoded by exon-l of Tat is sufficient to promote dimerization and (ii) cys37 is essential for homo-dimerization of Tat protein. Furthemore, by using a new E.coli strain in which the expression of beta-galactosidase is under the negative control of the cl::Tat repressor, we select a protein (CD10/Nep) expressed by human Jurkat T-cells which inhibits Tat dimerization. (C) 1994 Academic Press, Inc.