We recently reported that protein phosphatase 1 (PP1) dephosphorylates RNA polymerase II C-terminal repeats and regulates HIV-1 transcription in vitro. Here we provide evidence that PP1 is also required for Tat-induced HIV-1 transcription and for viral replication in cultured cells. Inhibition of PP1 by overexpression of nuclear inhibitor of PP1 (NIPP1) inhibited Tat-induced HIV-1 transcription in transient transfection assays. A mutant of NIPP1 that was defective in binding to PP1 did not have this effect. Also the co-expression of PP1 gamma reversed the inhibitory effect of NIPP1. Adeno-associated virus-mediated delivery of NIPP1 significantly reduced HIV-1 transcription induced by Tat-expressing adenovirus in CD4+ HeLa cells that contained an integrated HIV-1 promoter (HeLa MAGI cells). In addition, infection of HeLa MAGI cells with adeno-associated virus-NIPP1 prior to the infection with HIV-1 significantly reduced the level of HIV-1 replication. Our results indicate that PP1 might be a host cell factor that is required for HIV-1 viral transcription. Therefore, nuclear PP1 may represent a novel target for anti-HIV-1 therapeutics.