ABSTRACT Papillomavirus E2 proteins play a central role in regulating viral gene expression and replication. DNA-binding activity is associated with the C-terminal domain of E2, which forms a stable dimer, while the N-terminal domain is responsible for E2's replication and transactivation functions. The crystal structure of the latter domain revealed a second dimerization interface on E2 which may be responsible for DNA loop formation in the regulatory region of the human papillomavirus (HPV) genome. We investigated the biological significance of the N-terminal dimerization by introducing single amino acid substitutions into the dimerization interface. As expected, these substitutions did not influence the C-terminal dimerization and DNA-binding functions of E2. However, the mutations led to reduced transactivation of a synthetic E2-responsive reporter gene, while HPV DNA replication was unaffected. The effect of the mutations on DNA looping was visualized by atomic force microscopy. While wild-type E2 was able to generate DNA loops, all three mutant E2 proteins were defective in this ability. Our results suggest that N-terminal dimerization plays a role in E2-mediated transactivation, probably via DNA looping, a common mechanism for remote regulation of gene transcription.