The human immunodeficiency virus type 1 (HIV-1) encodes a potent transactivator, Tat, which functions through binding to a short leader RNA, called transactivation responsive element (TAR). Recent studies suggest that Tat activates the HIV-1 long terminal repeat (LTR), mainly by adapting co-activator complexes, such as p300, PCAF and the positive transcription elongation factor P-TEFb, to the promoter. Here, we show that the proto-oncoprotein Hdm2 interacts with Tat and mediates its ubiquitination in vitro and in vivo. In addition, Hdm2 is a positive regulator of Tat-mediated transactivation, indicating that the transcriptional properties of Tat are stimulated by ubiquitination. Fusion of ubiquitin to Tat bypasses the requirement of Hdm2 for efficient transactivation, supporting the notion that ubiquitin has a non-proteolytic function in Tat-mediated transactivation.