Analysis of human T-lymphotropic virus type II (HTLV-II) isolates from North America and Europe have demonstrated the existence of two molecular subtypes of the virus, HTLV-IIa and HTLV-IIb. Recently, studies on HTLV-II infections in Brazil have revealed isolates that are related phylogenetically to the HTLV-IIa subtype but have a HTLV-IIb phenotype with respect to the transactivating protein, tax. To more clearly define this relationship, HTLV-II was isolated from peripheral blood of an IVDA from Sao Paulo, Brazil (SP-WV), and the complete provirus was cloned and sequenced. Comparison of HTLV-II(SP-WV) nucleotide sequences to other available complete HTLV-II proviral sequences revealed that HTLV-II(SP-WV) is most closely related to HTLV-II(Mo), the prototypic HTLV-IIa subtype sequence. Phylogenetic analysis of LTR, env, and tax regions unequivocally demonstrated that HTLV-II(SP-WV) and all other Brazilian sequences examined are members of the IIa subtype. The predicted amino acid sequences of the major coding regions of HTLV-II(SP-WV) are also most closely related to HTLV-II(Mo), with the important exception of tax. The tax protein encoded by HTLV-II(SP-WV) is 96-99% identical to the tax of IIb isolates and is similar in that it has an additional 25 amino acids at the carboxy-terminus compared to the HTLV-II(Mo) tax with which it shares 91% identity. Analysis of tax stop codon usage of a number of HTLV-IIa isolates from North American, Europe, and Brazil demonstrated that isolates from the last region appear to be unique in their extended tax phenotype. It could be demonstrated that the extended tax proteins in the HTLV-IIb and Brazilian isolates had equivalent ability to transactivate the viral LTR, and studies with deletion mutants indicated that the extended C-terminus is not essential for transactivation. In contrast, the HTLV-IIa tax was found to have a greatly diminished ability to transactivate the viral LTR, which appeared to be a consequence of reduced expression of the protein. The studies show that although the Brazilian strains do not represent an entirely new subtype based on nucleotide sequence analysis they are a phenotypically unique molecular variant within the HTLV-IIa subtype.