The major regulator of papillomavirus transcription is encoded by the viral E2 gene. The E2 gene has been well characterized in bovine papillomavirus (BPV) where it encodes at least three different polypeptides which differentially affect viral gene expression. In human papillomaviruses (HPVs) the E2 gene product is much less well characterized. In this study we have analysed the mechanism of action of the HPV-16, HPV-18 and BPV-1 E2 proteins in cervical keratinocytes. We show that the full length HPV E2 protein acts as a potent transcriptional activator of viral gene expression in both normal and immortalized keratinocytes. In contrast, the BPV-1 E2 protein produces transcriptional repression under identical conditions. A cDNA encoding the C-terminal half of the HPV-16 E2 protein in these assays weakly repressed viral gene expression. Further, co-transfection of this cDNA with the full length clone progressively abolishes the activation in trans by the full length HPV E2 protein. Gel retardation assays have defined a number of protein complexes between the long and short forms of E2 but with no evidence for preferential DNA binding. These results define two distinct activities for the HPV-16 E2 protein, indicate functional differences with the BPV E2 protein and suggest that splicing of the HPV E2 mRNA is a critical mechanism for controlling viral gene expression.