Visna virus is a pathogenic lentivirus of sheep tat is distantly related to the primate lentiviruses, including human immunodeficiency virus type 1. The visna virus genome encodes a small regulatory protein, Tat, which is necessary for efficient viral replication and enhanced viral transcription. To investigate the mechanism of action of the visna Tat protein and to localize the protein domain(s) responsible for transcriptional activation, chimeric proteins containing visna virus Tat sequences fused to the DNA binding domain of the yeast transactivation factor GAL4 (residues 1 to 147) were made. The GAL4-Tat fusion proteins were transfected into cells and tested for the ability to activate the adenovirus E1b promoter via upstream GAL4 DNA binding sites. Full-length GAL4-Tat fusion proteins were weak transactivators in this system, giving only a two- to fourfold increase in transcription in several cell types, including HeLa and sheep choroid plexus cells. In contrast, fusion of the N-terminal region of the Tat protein to GAL4 revealed a potent activation domain. Amino acids 13 to 38 appeared to be the most critical for activation. No other region of the protein showed any activation in the GAL4 system. This N-terminal region of the visna virus Tat protein has a large number of acidic and hydrophobic residues, suggesting that Tat has an acidic activation domain common to many transcriptional transactivators. Mutations in hydrophobic and bulky aromatic residues dramatically reduced the activity of the chimeric protein. Competition experiments suggest that mechanism of the visna virus Tat activation domain may closely resemble that of the herpesvirus activator VP16 and human immunodeficiency virus Tat, a related lentivirus activator, since both significantly reduce the level of visna virus Tat activation. Finally, a domain between residues 39 and 53 was identified in the Tat protein that, in the GAL4 system, negatively regulates activation by Tat.