Bovine leukemia virus (BLV) tax is an essential gene involved in the transcriptional activation of viral expression. Tax is also believed to be implicated in leukemogenesis because of its ability to immortalize primary cells in vitro. To gain insight into the molecular pathways mediating the activities of this important gene, we identified cellular proteins interacting with Tax. By means of a two-hybrid approach, we show that Tax specifically interacts with MSX2, a general repressor of gene expression. GST pull-down experiments and co-immunoprecipitation assays further confirmed binding specificity. Furthermore, the N-terminal residues 1-79 of MSX2 are required for binding, whereas the C-terminal residues 201-267 of MSX2 do not play a critical role. Whereas the oncogenic potential of Tax in primary cells was only slightly affected by overexpression of MSX2, the other function of Tax, namely LTR-dependent transcriptional activation, was inhibited by MSX2 in human HeLa and bovine B-lymphoblastoid (BL3) cell lines. This MSX2 repression function can be counteracted by overexpression of transcription factors CREB2 and RAP74. The Tax/MSX2 interplay thus results in repression of viral transcriptional activation possibly acting as a regulatory feedback loop. Importantly, this viral gene silencing is not strictly associated with a concomitant loss of Tax oncogenicity as measured by its ability to immortalize primary cells. And interestingly, MSX2 also interacts with and inhibits the transactivation function of the related Tax1 protein encoded by the Human T-cell leukemia virus type 1 (HTLV-1).