We have performed transient-expression experiments with CV1 monkey kidney cells to investigate the role of the bovine papillomavirus type 1 (BPV1) E2 gene in the regulation of the E5 transforming gene. Direct analysis of the 7-kilodalton open reading frame (ORF) E5 protein and measurements of the expression of an E5-chloramphenicol acetyltransferase fusion protein indicate that the efficient expression of ORF E5 requires the full-length E2 gene, which can be supplied in trans. The viral long control region is required in cis for this response to ORF E2, and it acts in a position- and orientation-independent fashion characteristic of a transcriptional enhancer. Deletion analysis suggests that the P2443 promoter is required for efficient expression of the E5 gene. The E2 repressor activity encoded in the 3' end of the E2 gene inhibits the expression of ORF E5. These effects define a major BPV1 regulatory circuit and appear to explain the transformation behavior of a variety of BPV1 mutants.