ABSTRACT HMG I/Y appears to be a multifunctional protein that relies on in its ability to interact with DNA in a structure-specific manner and with DNA, binding transcriptional activators via distinct protein-protein interaction surfaces. To investigate the hypothesis that HMG I/Y may have a role in human immunodeficiency virus type 1 (HIV-1) expression, we have analyzed whether HMG I/Y interacts with the 5′ long terminal repeat and whether this interaction can modulate transcription factor binding. Using purified recombinant HMG I, we have identified several high-affinity binding sites which overlap important transcription factor binding sites. One of these HMG I binding sites coincides with an important binding site for AP-1 located downstream of the transcriptional start site, in the 5′ untranslated region at the boundary of a positioned nucleosome. HMG I binding to this composite site inhibits the binding of recombinant AP-1. Consistent with this observation, using nuclear extracts prepared from Jurkat T cells, we show that HMG I (but not HMG Y) is strongly induced upon phorbol myristate acetate stimulation and this induced HMG I appears to both selectively inhibit the binding of basal DNA-binding proteins and enhance the binding of an inducible AP-1 transcription factor to this AP-1 binding site. We also report the novel finding that a component present in this inducible AP-1 complex is ATF-3. Taken together, these results argue that HMG I may play a fundamental role in HIV-1 expression by determining the nature of transcription factor-promoter interactions.