The T antigen of simian virus 40 (SV40) is a multifunctional phosphoprotein normally locating in the cell nucleus. It is implicated in the regulation of viral and cellular gene expression, in the replication of DNA and in the transformation of infected cells. Here, we have constructed the expression system of karyophilic and nonkaryophilic T antigens, and investigated their activities of transcriptional regulation and transformation in the African green monkey kidney CV1 cells and the rat fibroblast 3Y1 cells. The wild type, karyophilic T antigen showed the transcriptional regulatory activities of trans-activation and trans-suppression on the SV 40 promoter and also showed the transforming activity. But the mutant, nonkaryophilic T antigen showed none of the activities of transcriptional regulation and transformation. These results indicate that the nuclear localization of the SV40 T antigen is necessary for the regulation of gene expression and transformation of infected cells. Our results also suggest that the function of transcriptional regulation might be closely related to the transformation of cells by T antigen.