Efficient HIV transcription requires P-TEFb, an essential co-factor for Tat. In actively replicating cells, P-TEFb is incorporated into the 7SK snRNP complex together with the repressor protein HEXIM1. Using an affinity purification-tandem mass spectrometry approach to identify modification sites on HEXIM1 that regulate the sequestration of P-TEFb by 7SK snRNP, we found that HEXIM1 can be phosphorylated on adjacent residues in a region immediately upstream of the coiled-coil dimerization domain (Ser268, Thr270, Tyr271, and Tyr274). Phosphomimetic mutations of Tyr271 and Tyr274 disrupted the assembly of P-TEFb and HEXIM1 into the 7SK snRNP complex. Although Y271E/Y274E did not adversely affect the nuclear localization pattern of HEXIM1, it induced the redistribution of the CDK9 subunit of P-TEFb into the cytoplasm. By contrast, the Y271F/Y274F HEXIM1 mutant assembled normally with P-TEFb within the 7SK snRNP complex but severely reduced proviral gene expression in T cells in response to activation signals and caused a severe growth defect of Jurkat T cells. Thus Y271F/Y274F, which cannot be phosphorylated on these residues, appears to block the exchange of active P-TEFb from the 7SK complex, thereby limiting the level of P-TEFb below the threshold required to support transcription elongation of the HIV provirus and cellular genes.