Telomerase is required for the maintenance of telomere length and is an important determinant for cell immortalization. In human cells, telomerase activity is due to the expression of its enzymatic subunit, human telomerase reverse transcriptase (hTERT). The expression of hTERT is not typically detectable in healthy somatic human cells but is present in cancerous tissues and immortalized cells. We have previously shown that hTERT promoter activity is up-regulated by the Kaposi's sarcoma-associated herpesvirus (KSHV)-encoded latency-associated nuclear antigen (LANA). LANA is expressed in all forms of human malignancies associated with KSHV. The hTERT promoter sequence located at positions -130 to +5 contains several Sp1 binding motifs and was shown be important for up-regulation by LANA. In this report, we demonstrate that hTERT promoter activity is due to the direct interaction of LANA with Sp1. The interaction of LANA with Sp1 was demonstrated through in vitro binding experiments and coimmunoprecipitation and is supported by the colocalization of these two molecules in the nuclei of KSHV-infected cells. Moreover, LANA modulates Sp1-mediated transcription in transient GAL4 fusion reporter assays. Mapping of the regions involved in binding and transcriptional activation showed that the amino terminus of LANA is the major site for interaction and up-regulation but that it can cooperate with the carboxy terminus to enhance these functions. An analysis of Sp1 binding to its cognate sequence corroborated the binding data. Together, our results suggest that the interaction of LANA with Sp1 up-regulates the telomerase promoter, potentially contributing to the immortalization of KSHV-infected cells.