Id1 is a helix-loop-helix transcriptional factor that controls growth and survival of neuronal cells. Downregulation of Id1 expression is required to initiate differentiation and cell-cycle withdrawal in primary neuronal culture as well as in PC12 cells. The HIV-1 transactivating factor, Tat, has been suspected of causing neuronal dysfunction that often leads to the development of HIV-associated dementia in AIDS patients. We found that the expression of Tat in PC12 cells promotes serum-independent growth, formation of large colonies in soft agar, and the acceleration of tumor growth in nude mice. In addition, Tat showed the ability to inhibit the nerve growth factor (NGF)-induced neuronal differentiation of PC12 cells. Our results show that the Tat-mediated signaling events, which lead to serum-independent growth and the inhibition of NGF-induced differentiation, have a common cellular target: the upregulation of Id1 expression. In the absence of NGF, expression of Id1 is required to promote serum-independent proliferation of PC12/Tat cells, as the inhibition of Id1 by antisense DNA restored the serum-dependent growth of PC12/Tat cells. In the presence of NGF, Tat utilizes an additional pathway that involves phosphorylation of Stat5a, to upregulate Id1 expression and block neuronal cell differentiation. Suppression of Stat5a by use of its dominant-negative mutant reversed the transient expression of Id1 and the blockage of NGF-mediated differentiation in PC12/Tat cells. Finally, the treatment of PC12 cells with recombinant Tat also enhanced the NGF-induced Id1 expression, further pointing to Id1 as a target for Tat. Taken together, these studies suggest additional targets for Tat action in neuronal cells and provide new insights into the mechanisms involved in the dysregulation of neuronal functions.