Expression of the viral protein R, Vpr, of HIV-1 affects many biological events in host cells including cell cycle progression, and modulates HIV-1 gene transcription. Earlier studies implicating the cellular protein p21(WAF1) (p21) in regulation of HIV-1 transcription, led us to investigate the functional and physical interaction of Vpr and p21. Our results show that Vpr modestly activated HIV-LTR in cells lacking p21 gene. Here, we describe the mechanisms by which p21 and Vpr leading to stimulation of HIV-1 transcription. Data from the protein-protein interaction experiments revealed the ability of Vpr, p21 and p300 to form a complex. Further, we show that, Vpr interacts with the N- and the C-terminal domains of p21. Furthermore, in cells expressing Vpr, p21 localizes to both the cytoplasm and the nucleus. Interestingly, expression of Vpr alleviates p21-mediated inhibition of cell departure from G1 phase. Expression of a mutant Vpr, with arginine 73 altered to serine, did not affect the ability of p21 to cause cells arrest or its sub-cellular localization. These observations reveal a new cellular partner for Vpr, and provide a new therapeutic avenue for controlling HIV-1 expression.