The parvovirus early protein NS1 positively regulates the expression of the P38 promoter for the viral capsid protein gene. We have examined the trans-activation of P38 by NS1 by using fusions of P38 to the reporter gene, chloramphenicol acetyltransferase (cat). Maximal trans-activation requires a small 5' cis element (tar) between -137 and -116. The tar element has activity in both orientations when 5' to the P38 promoter, but no activity has been detected 3' to the promoter. The wild-type P38 has a biphasic response to NS1 depending on the dosage of the NS1-expressing plasmid. Promoters lacking the tar also have a biphasic response that is reduced about 10-fold, and they can be inhibited by larger doses of the NS1 plasmid. Heterologous promoters from other viruses and the Harvey-ras oncogene promoter are inhibited by NS1. Truncated and internally deleted versions of NS1 lose the trans-activation, but some of them retain the inhibitory properties. Thus transactivation can be uncoupled from inhibition. The tar element has shown no activity with the heterologous simian virus 40 early promoter. In contrast, the P38 promoter responds to a heterologous enhancer, but the enhanced promoter loses activity to trans-activation by NS1. In summary, the P38 tar element has some of the properties of an enhancer with a high preference for a 5' position and a stringent requirement for the P38 promoter.