In order to ensure a productive life cycle, human papillomaviruses (HPVs) require fine regulation of their gene products. Uncontrolled activity of the viral oncoproteins E6 and E7 results in the immortalization of the infected epithelial cells and thus prevents the production of mature virions. Ectopically expressed E2 has been shown to suppress transcription of the HPV E6 and E7 region in cell lines where the viral DNA is integrated into the host genome, resulting in growth inhibition. However, it has been demonstrated that growth control of these cell lines can also occur independently of HPV E2 transcriptional activity in high-risk HPV types. In addition, E2 is unable to suppress transcription of the same region in cell lines derived from cervical tumors that harbor only episomal copies of the viral DNA. Here we show that HPV type 16 (HPV-16) E2 is capable of inhibiting HPV-16 E7 cooperation with an activated ras oncogene in the transformation of primary rodent cells. Furthermore, we demonstrate a direct interaction between the E2 and E7 proteins which requires the hinge region of E2 and the zinc-binding domain of E7. These viral proteins interact in vivo, and E2 has a marked effect upon both the stability of E7 and its cellular location, where it is responsible for recruiting E7 onto mitotic chromosomes at the later stages of mitosis. These results demonstrate a direct role for E2 in regulating the function of E7 and suggest an important role for E2 in directing E7 localization during mitosis.