The cytokines TNFalpha and IFNgamma have previously been shown to activate caprine arthritis encephalitis virus (CAEV) transcription. Increased viral titers correlate with increased lesion severity. Therefore, TNFalpha and IFNgamma may augment the caprine arthritis lesion by increasing viral titers. CAEV transcription is under the control of the viral promoter within the U3 region of the long terminal repeat. A set of U3 deletion mutants was generated and used to establish stably integrated, U937-based cell lines. These cell lines were utilized to define the required promoter sequences for cytokine-induced transcriptional activation. Here we have identified a novel 17 nucleotide TNF-activated site within the U3 region 70 bp repeat which is both required and sufficient in a minimal construct for TNFalpha-induced CAEV transcriptional activation. In contrast to the results of previous studies with IFNgamma, we found that multiple sequences within the U3 region 70 bp repeat were required for IFNgamma-activation of the CAEV promoter. The results identify previously unrecognized complexity in the CAEV promoter that may be relevant to viral replication and disease.