The large tumor antigen (TAg) of simian virus 40 regulates transcription of the viral genes. The early promoter is repressed when TAg binds to the origin and DNA replication begins, whereas the late promoter is activated by TAg through both replication-dependent and -independent mechanisms. Previously it was shown that activation is diminished when a site in the viral enhancer to which the factor TEF-1 binds is disrupted. We show here that the NH2-terminal region of TAg binds to the TEA domain of TEF-1, a DNA binding domain also found in the Drosophila scalloped and the Saccharomyces cerevisiae TEC1 proteins. The interaction inhibits DNA binding by TEF-1 and activates transcription in vitro from a subset of naturally occurring late start sites. These sites are also activated by mutations in the DNA motifs to which TEF-1 binds. Therefore, TEF-1 appears to function as a repressor of late transcription, and its involvement in the early-to-late shift in viral transcription is discussed. The mutation of Ser-189 in TAg, which reduces transformation efficiency in certain assays, disrupts the interaction with TEF-1. Thus, TEF-1 might also regulate genes involved in growth control.