Expression of the human T-cell leukemia virus type I (HTLV-I) rex gene is a prerequisite for the expression of the retroviral structural proteins. We have generated internal deletion mutants of this 27-kDa nucleolar trans-acting gene product to define functional domains in the Rex protein. The phenotype of the various mutant proteins was tested on the homologous HTLV-I rex response element sequence and the heterologous human immunodeficiency virus type 1 (HIV-1) rev response element sequence. Our results indicate that a region between amino acid residues 55 and 132 in the 189-amino-acid Rex protein is required for Rex-mediated trans activation on both retroviral response element sequences. In addition, substitution of the Rex nuclear localization signal by a sequence of the HIV-1 rev gene product targets the Rex protein to the correct subcellular compartment required for Rex function.