Tetherin (Bst2/CD317/HM1.24) is an interferon-induced antiviral host protein that inhibits the release of many enveloped viruses by tethering virions to the cell surface. The HIV-1 accessory protein, Vpu, antagonizes Tetherin through a variety of proposed mechanisms, including surface downregulation and degradation. Previous studies have demonstrated that mutation of the transmembrane domains (TMD) of both Vpu and Tetherin affect antagonism, but it is not known whether Vpu and Tetherin bind directly to each other. Here, we use cysteine-scanning mutagenesis coupled with oxidation-induced cross-linking to demonstrate that Vpu and Tetherin TMDs bind directly to each other in the membranes of living cells and to map TMD residues that contact each other. We also reveal a property of Vpu, namely the ability to displace Tetherin from sites of viral assembly, which enables Vpu to exhibit residual Tetherin antagonist activity in the absence of surface downregulation or degradation. Elements in the cytoplasmic tail domain (CTD) of Vpu mediate this displacement activity, as shown by experiments in which Vpu CTD fragments were directly attached to Tetherin in the absence of the TMD. In particular, the C-terminal α-helix (H2) of Vpu CTD is sufficient to remove Tetherin from sites of viral assembly and is necessary for full Tetherin antagonist activity. Overall, these data demonstrate that Vpu and Tetherin interact directly via their transmembrane domains enabling activities present in the CTD of Vpu to remove Tetherin from sites of viral assembly.