The human T-cell leukemia virus (HTLV) types I and II have two nonstructural genes that are encoded in overlapping reading frames. One of these genes, known as tax, has been shown to encode a protein responsible for enhanced transcription (transactivation) from the viral long terminal repeats (LTRs). Genetic evidence indicates that the second nonstructural gene of HTLV-II, here designated rex, acts in trans to modulate tax gene-mediated transactivation in a concentration-dependent fashion. The rex gene may regulate the process of transactivation during the viral life cycle.