Cell proliferation and terminal differentiation are mutually exclusive in most cell lineages. The b-zip transcription factor CCAAT/enhancer-binding protein alpha (C/EBPalpha) induces proliferation arrest and differentiation in many cell types, suggesting that both activities are linked. Here we show that C/EBPalpha-mediated proliferation arrest and differentiation pathways can be separated by the E7 oncoprotein of the "high-risk" human papilloma virus 16. The E7 oncoprotein overrides C/EBPalpha-mediated cell cycle withdrawal without compromising the transactivation activity of C/EBPalpha or its ability to participate in differentiation. Uncoupling of both pathways depends on the casein kinase II site of the oncoprotein but not on its ability to neutralize pocket proteins or the cyclin-dependent kinase inhibitor protein p21. Our results suggest a bifurcation of C/EBPalpha-mediated proliferation arrest and differentiation pathways.