Protein kinase C (PKC) is involved in the mitogenic stimulation of cell proliferation and has recently been reported to be essential for Tat-mediated trans activation. We have determined that RNA binding of a cellular factor which specifically interacts with the trans-activation response region (TAR) is blocked in cells depleted of PKC activity by chronic phorbol myristate acetate stimulation. We also show that nuclear extracts can be depleted of the cellular TAR-binding factor by in vitro treatment with purified protein phosphatase 2A. Furthermore, TAR RNA-binding activity can be partially restored to depleted nuclear extracts in vitro by addition of PKC. Chimeric constructs in which the Tat protein is artificially tethered to viral RNA show PKC independence for Tat-mediated trans activation. Specific mutations in the TAR RNA stem region which cause reduced binding of host cell factor in vitro also cause reduced Tat-mediated trans activation in vivo. Together, these results suggest that phosphorylation-dependent binding of a cellular cofactor to TAR RNA is an essential step in Tat-mediated trans activation. Deciphering the regulation of Tat-mediated trans activation by phosphorylation will be critical in fully understanding the regulation of human immunodeficiency virus type 1 activation.