We have mapped a transcriptional regulatory sequence within the 1.0 kb noncoding region of the bovine papilloma virus (BPV-1) genome, using an enhancer dependent expression vector for chloramphenicol acetyltransferase. This transcriptional regulatory element works independently of position and orientation, and its function is significantly augmented in BPV-1 transformed C127 cells and in monkey CV-1 cells acutely transfected with plasmids expressing BPV-1 early gene products. Using defined deletion mutants of the BPV-1 DNA and full-length viral cDNAs expressed from an SV40 early promoter, we demonstrate that the expression of this trans-activating factor maps to the 3' open reading frames of the viral transforming region. A premature termination codon engineered into the E2 ORF eliminates expression of this diffusible transactivation function establishing the E2 gene product as the diffusible trans-activating factor.