We have recently reported that chicken ovalbumin upstream promoter transcription factor (COUP-TF) activates human immunodeficiency virus type 1 (HIV-1) gene transcription in glial and neuronal cells. Here, we have examined the role of COUP-TF in microglial cells, the major target cells for HIV-1 infection in brain. We show that COUP-TF activates gene expression from both the lymphotropic LAI and the macrophage-tropic JR-FL HIV-1 strains. Although COUP-TF binds to the -352/-320 nuclear receptor responsive element of the long terminal repeat, it functions as a transcriptional activator by acting on the -68/+29 minimal promoter. This region is a direct target of transcription factors Sp1 and Sp3. We report the discovery and features of a physical and functional interplay between COUP-TF and Sp1. Our cotransfection experiments provide evidence for a functional synergism between Sp1 and COUP-TF leading to enhanced transcriptional activity of the HIV-1 long terminal repeat through the Sp1 element. In contrast, Sp3 functions as a repressor of Sp1- or COUP-TF-induced activation. We further demonstrate that COUP-TF and Sp1 are capable of physically interacting, via the DNA-binding domain of COUP-TF, in vitro and in the cell. These findings reveal how the novel interplay of Sp1 and COUP-TF families of transcription factors regulate HIV-1 gene expression.