Regulation of human immunodeficiency virus (HIV) gene expression is dependent on specific regulatory regions in the long terminal repeat. These regions include the enhancer, SP1, "TATA," and trans-activating (TAR) regions. In addition, viral regulatory proteins such as tat and rev are important in regulating HIV gene expression. The mechanism of tat activation remains the subject of investigation, but effects at both transcriptional and posttranscriptional levels seem likely. Previous mutagenesis of the tat protein revealed that the amino terminus, the cysteine-rich domain, and the basic domain were all required for complete tat activation. Mutants of other viral trans-acting regulatory proteins, including E1A, tax, and VM65, have been identified that were capable of antagonizing the activity of their corresponding wild-type proteins. We wished to determine whether mutants of the tat protein could be identified that exhibited a similar phenotype. One mutant (delta tat) that truncated the basic domain of tat resulted in a transdominant phenotype inhibiting tat-induced gene expression of the HIV long terminal repeat but not other viral promoters. This mutant exhibited its maximal phenotype in cotransfection experiments when present in an 8- to 30-fold molar excess over the wild-type tat gene. Trans-activation of the HIV long terminal repeat by delta tat was very defective at the DNA concentrations used in these experiments. RNase protection analysis indicated that this mutant decreased tat-induced steady-state mRNA levels of the HIV long terminal repeat. Second-site mutations of the delta tat gene in either the amino terminus or cysteine region eliminated the transdominant phenotype. In contrast to tat, which was localized predominantly to the nucleolus, delta tat was present in both the nucleus and cytoplasm, suggesting that it may inhibit tat function by preventing nucleolar localization. Transdominant mutants of tat may have a role in potentially inhibiting HIV gene expression.