In human cytomegalovirus (HCMV) infection, the isolated expression of the viral immediate-early protein 2 (IE2) 86 kDa regulatory protein coincides with an up-regulation of cyclin E gene expression, both in fibroblasts and U373 cells. Since IE2 also interferes with cell-cycle progression, it is unclear whether IE2 is a genuine activator of cyclin E or whether IE2-arrested cells contain elevated levels of cyclin E primarily as a consequence of them being arrested at the beginning of S phase. It is important to distinguish between these possibilities in order to define and analyse at a mechanistic level the proliferative and anti-proliferative capacities of IE2. Here we have shown that IE2 can activate cyclin E independent of the cell-cycle state and can therefore function as a genuine activator of cyclin E gene expression. A mutant of IE2 that failed to activate cyclin E also failed to promote G1/S transition. Instead, cells became arrested in G1. S-phase entry could be rescued in these cells by co-expression of cyclin E, but these cells still arrested in early S phase, as is the case with wild-type IE2. Our data demonstrate that IE2 can promote two independent cell-cycle functions at the same time: (i) the induction of G1/S transition via up-regulation of cyclin E, and (ii) a block in cell-cycle progression in early S phase. In G1, the proliferative activity of IE2 appears to be dominant over the anti-proliferative force, whereas after G1/S transition, this situation is reversed.