VP16 is a herpes simplex virus (HSV)-encoded transcriptional activator protein that is essential for efficient viral replication and as such may be a target for novel therapeutic agents directed against viral gene expression. We have reconstituted transcriptional activation by VP16 in an in vitro system that is dependent on DNA sequences from HSV immediate-early gene promoters and on protein-protein interactions between VP16 and Oct-1 that are required for VP16 activation in vivo. Activation increased synergistically with the number of TAATGARAT elements (the cis-acting element for VP16 activation in vivo) upstream of the core promoter, and mutations of this element that reduce Oct-1 or VP16 DNA binding reduced transactivation in vitro. A VP16 insertion mutant unable to interact with Oct-1 was inactive, but, surprisingly, a deletion mutant lacking the activation domain was approximately 65% as active as the full-length protein. The activation domains of Oct-1 were necessary for activation in reactions containing the VP16 deletion mutant, and they contributed significantly to activation by full-length VP16. Addition of a GA-rich element present in many HSV immediate-early gene enhancers synergistically stimulated VP16-activated transcription. Finally, oligopeptides that are derived from a region of VP16 thought to contact a cellular factor known as HCF (host cell factor) and that inhibit efficient VP16 binding to the TAATGARAT element also specifically inhibited VP16-activated, but not basal, transcription. Amino acid substitutions in one of these peptides identified three residues that are absolutely required for inhibition and presumably for interaction of VP16 with HCF.