The Tax protein of human T-cell leukemia virus type 1 (HTLV-1) is a transcriptional transactivator and viral oncogene. Since cellular transformation has been frequently linked to alterations in genome stability, we investigated the effect of Tax on nucleotide excision repair (NER), a prominent cellular DNA repair pathway. Cells expressing Tax exhibited a reduced capacity for NER as measured by unscheduled DNA synthesis and host cell reactivation assays. The cellular proliferating cell nuclear antigen (PCNA) gene product regulates DNA replication and repair pathways, including NER. Since Tax activates transcription of the PCNA promoter, we investigated whether this activity contributes to the reduction of NER. Tax increased endogenous PCNA protein expression, and analysis of Tax mutant proteins demonstrated that the reduction in NER correlated with Tax transactivation of PCNA gene expression. Direct overexpression of PCNA also reduced NER. We propose that overexpression of PCNA, and disruption of NER induced by Tax, predisposes cells to accumulate DNA damage and contributes to HTLV-1 transformation.