The HIV-1 transactivator Tat performs various viral and cellular functions. Primarily, it induces processive transcription from the HIV-1 LTR promoter. However, Tat secreted from infected cells is known to activate uninfected lymphocytes through receptors. To further delineate the specific target genes, extracellular Tat was expressed on the cell membrane of stimulator cells and co-cultured with human PBMCs. Along with induced CD4(+) T cell proliferation and IFN-gamma secretion, there was strong upregulation of T-bet expression which is majorly implicated in generating T(H)1 type of immune response. To further delineate the effect of extracellular Tat on HIV replication, both p24 analysis and in vivo GFP expression were performed. There was a significant inhibition of HIV-1 replication in human CEM-GFP cell line and hPBMCs. Thus, for the first time we report that apart from its transactivation activity, extracellular Tat acts as a costimulatory molecule that affects viral replication by modulating host immune response through induction of T-bet expression and IFN-gamma secretion. (c) 2005 Elsevier Inc. All rights reserved.