Regulation of human T cell leukemia virus type II (HTLV-II) gene expression by Rex is mediated by cis-acting elements in the 5' viral long terminal repeat (LTR). Rex acts posttranscriptionally to enhance cytoplasmic accumulation of incompletely spliced viral mRNAs encoding structural proteins. We report a distinct negative regulatory function mediated by Rex affecting expression from the viral 5' LTR. Using both LTR-driven CAT reporters and a full-length HTLV-II proviral construct, we demonstrate that Rex decreases total cellular levels of LTR-containing mRNA in a dose-dependent manner. Negative regulation is an independent function as demonstrated by structural and functional dissociation from Rex positive posttranscriptional regulation. This negative regulatory action was dependent on nuclear localization sequences, but did not require the previously defined Rex-responsive element (RxRE). Negative regulation was observed in T cell lines but not in B cell lines, suggesting the involvement of cell type-specific factors distinct from those involved in posttranscriptional regulation. An internal deletion mutant of Rex removing aa 38-80 retained the ability to repress, but did not posttranscriptionally increase expression, while negative regulation requires a previously uncharacterized carboxy-terminal region (aa 154-170). These findings suggest that Rex may serve two simultaneous functions: to decrease overall levels of transcribed viral mRNA, and to facilitate nuclear to cytoplasmic export of mRNAs encoding structural proteins. The negative regulatory function of Rex may play a role in viral latency.