The hepatitis B virus X gene product transactivates a variety of cellular and viral genes. The mechanism for X induction of RNA polymerase (pol) III genes was investigated. By using Drosophila S-2 cells stably transformed with the X gene, the transient expression of a tRNA gene is enhanced. Comparing the transcriptional activities of extracts derived from these cells, all three types of RNA pol III promoters are stimulated by X. Interestingly, both S-2 and rat 1A cells stably transformed with the X gene produce increased cellular levels of the TATA-binding protein (TBP). By using various kinase inhibitors, it was found that the X-mediated increases in both transcription and TBP are dependent upon protein kinase C activation. Since TBP is a subunit of TFIIIB, the activity of this component fractionated from extracts derived from control and X-transformed cells was analyzed. These studies reveal that TFIIIB activity is substantially more limiting in control cells and that TFIIIB isolated from X-transformed cells has increased activity in reconstitution assays compared with TFIIIB isolated from control cells. Conversely, comparison of TFIIIC from control and X-transformed cell extracts revealed that there is relatively little change in its ability either to reconstitute transcription or to bind to DNA and that there is no change in the catalytic activity of RNA pol III. Studies were performed to determine whether directly increasing cellular TBP alone could enhance RNA pol III gene transcription. Transient expression of a TBP cDNA in rat 1A cells was capable of stimulating transcription activity from the resultant extracts in vitro. Together, these results demonstrate that one mechanism by which X mediates transactivation of RNA poll III genes is by increasing limiting TBP via the activation of cellular signaling pathways. The discovery that X increases cellular TBP, the universal transcription factor, provides a novel mechanism for the function of a viral transactivator protein and may explain the ability of X to produce such large and diverse effects on cellular gene expression.