Human Immunodeficiency Virus type 1 (HIV-1) is a retrovirus that causes acquired immunodeficiency syndrome (AIDS). HIV-1 Tat protein upregulates transcriptional transactivation. The nucleocapsid protein NC of HIV-1 is a component of virion and plays a key role in genome packaging. Herein, we have demonstrated the interaction between NC and Tat by means of a yeast two-hybrid assay, GST pull-down analysis, co-immunoprecipitation and subcellular colocalization analysis. We observed that the level of Tat was significantly reduced in the presence of NC. But NC did not affect mRNA expression level of Tat. The level of Tat in the presence of NC was increased by treating cells with a proteasome inhibitor, MG132. The ubiquitination state of Tat was not seen to increase in the presence of NC, suggesting the proteasomal degradation was independent of ubiquitination. Lowered level of Tat in the presence of NC led to a decrease in Tat-mediated transcriptional transactivation.