We have previously shown that the parathyroid hormone-related protein (PTHrP) promoter contains binding sites for transcription factors Ets1 and Sp1 and that human T-cell lymphotropic virus type I (HTLV-I) Tax cooperates with Ets1 to transactivate the PTHrP P2 promoter. Using the yeast two-hybrid interaction system, we now provide evidence that Tax interacts with Ets1. Moreover, a double mutation (D22A,C23S) in the Tax protein that abrogated the Tax/Ets1 interaction also inhibited the Tax/Ets1 cooperative effect, suggesting that the interaction between Tax and Ets1 is important for transactivation of the PTHrP promoter. In coimmunoprecipitation assays, we find that Tax facilitates the interaction between Ets1 and Sp1, forming a ternary complex. When the Sp1 site in the PTHrP promoter was mutated, the Tax/Ets1 cooperative effect was dramatically decreased. This suggests that Sp1 plays an important role in the Ets1-dependent Tax transactivation of the PTHrP P2 promoter. Finally, we demonstrate that Gal4-Tax is a strong activator of the Gal PTHrP promoter, implying that Tax contributes directly to the transcriptional activation of the promoter. We propose a model in which the Tax/Ets1 cooperative effect on the PTHrP P2 promoter is based on the ability of Tax, Ets1, and Sp1 to form a ternary complex on the template DNA. Tax facilitates the interaction of Ets1/Sp1 and participates directly in the transcription initiation process.