The physical interaction of heterologous site-specific DNA-binding proteins is an important theme in eukaryotic transcriptional regulation. In this paper, we show that the cellular transcription factor Sp1 and the BPV-1 (bovine papillomavirus type 1) enhancer protein E2 activate transcription synergistically from two papilloma viral promoters and a series of synthetic promoter constructs in transient transfection experiments. Furthermore, Sp1 can target E2 to a promoter region even in the absence of a specific E2 DNA-binding motif. Biochemical experiments establish that Sp1 enhances E2 binding to its sites and that the two proteins form a specific complex. Sp1 sequesters distally bound E2 to the promoter region by formation of stable DNA loops, visualized by electron microscopy. These experiments substantiate the notion that enhancer binding proteins are targeted to promoter regions by direct interaction with proteins that bind proximal to the transcriptional start site.