Expression of the E7 oncogene of HPV-16 induces S phase entry of mammalian cells in the presence of antiproliferative signals. In particular, E7 can bypass G0/G1 arrest in response to both serum withdrawal and loss of cell adhesion, two experimental conditions in which cell cycle progression is accompanied by elevated levels of the cdk inhibitor p27KIP1. We show here that E7 can antagonize the ability of p27KIP1 to block cyclin E-associated kinase in vitro and to inhibit transcription from the cyclin A gene in transfection experiments. E7 associates with p27KIP1 both in a reconstituted in vitro system and in extracts of mammalian cells, and association requires the C-terminal part of E7. The interaction between p27KIP1 and E7 can also be demonstrated in a yeast two hybrid system. The data suggest that the ability of E7 to override certain forms of G0/G1 arrest is mediated in part by binding to and subsequent inactivation of the cdk inhibitor p27KIP1.