The positive transcription elongation factor b (P-TEFb), a complex of Cdk9 and cyclin T1/T2, stimulates transcription by phosphorylating RNA polymerase II. The 7SK small nuclear RNA, in cooperation with HEXIM1 protein, functions as a general polymerase II transcription regulator by sequestering P-TEFb into a large kinase-inactive 7SK/HEXIM1/P-TEFb complex. Here, determination and characterization of the functionally essential elements of human 7SK snRNA directing HEXIM1 and P-TEFb binding led to a new model for the assembly of the 7SK/HEXIM1/P-TEFb regulatory complex. We demonstrate that two structurally and functionally distinct protein binding elements located in the 5-and 3-terminal hairpins of 7SK support the in vivo recruitment of HEXIM1 and P-TEFb. Consistently, a minimal regulatory RNA composed of the 5 and 3 hairpins of 7SK can modulate polymerase II transcription in HeLa cells. HEXIM1 binds independently and specifically to the G24-C48/G60-C87 distal segment of the 5 hairpin of 7SK. Binding of HEXIM1 is a prerequisite for association of P-TEFb with the G302-C324 apical region of the 3 hairpin of 7SK that is highly reminiscent of the human immunodeficiency virus transactivation-responsive RNA.Cyclic phosphorylation of the tandemly repeated YSPTSPS heptapeptide motif in the carboxy-terminal domain (CTD) of the largest subunit of RNA polymerase II (Pol II) is crucial for stimulating mRNA production (9, 14). For example, during the early stage of transcription, phosporylation of the CTD at serine 2 by the positive transcription elongation factor b (PTEFb) is essential for the transition from abortive to productive transcription elongation (5,7,30,35). P-TEFb is a general transcription factor that facilitates the production of fulllength mRNAs of most, if not all, protein-coding genes and also stimulates the Pol II-mediated synthesis of human immunodeficiency virus (HIV) transcripts from the 5Ј long terminal repeat of the integrated proviral genome (5, 29). P-TEFb is composed of a cyclin-dependent kinase, Cdk9, and the regulatory subunit cyclin (Cyc) T1, T2, or K (22, 33, 41; reviewed in reference 23). In human HeLa cells, about half of P-TEFb is associated with large ribonucleoprotein (RNP) complexes which also contain the 7SK small nuclear RNA (snRNA) and the HEXIM1 or HEXIM2 protein (3,17,20,36,37,39). In contrast to its free form, the 7SK/HEXIM1-associated fraction of P-TEFb shows little CTD kinase activity, indicating that the 7SK snRNA, in collaboration with HEXIM1, functions as an inhibitory factor of P-TEFb. Association of P-TEFb with 7SK/HEXIM1 is specific and reversible. Inhibition of transcription by chemical or UV treatment induces dissociation of P-TEFb from the kinase-inactive 7SK/ HEXIM1/P-TEFb complex (17,20,36,37). Consequently, increased accumulation of free P-TEFb facilitates CTD phosphorylation and mRNA production. Likewise, depletion of 7SK snRNA increases the CTD kinase activity of P-TEFb and stimulates transcription from Pol II-specific promoters, including the HIV long terminal repeat...