Human T-lymphotropic virus type 1 Tax interacts specifically with the cellular transcription factor CREB and the viral 21-bp repeat element to form a Tax-CREB-DNA ternary complex which mediates activation of viral mRNA transcription. Analyses of Tax and Tax mutants indicate that, like CREB, Tax incorporates into the ternary complex as a dimer. The ability of Tax to form a dimer is necessary for its interaction with CREB and the 21-bp element. Analyses of several Tax mutants with amino acid substitutions spanning residues 123 to 204 indicate that intersubunit Tax dimerization correlates with its ability to assemble into the ternary complex and activate transcription. Tax also enhances the DNA binding activities of specific bZip domains in vitro. The ability of Tax to enhance DNA binding of bZip proteins can be explained in part by Tax dimerization. This activity alone is not sufficient for transactivation. A dual amino acid substitution mutant of Tax, M47 (L319R, L320S), completely abrogated for activation of the human T-lymphotropic virus type 1 long terminal repeat as a result of a defect in the transactivation domain, continues to stimulate binding of bZip proteins to DNA.