The human immunodeficiency virus-1 (HIV-1) Nef protein, originally identified as a negative factor, has now emerged as one of the most important viral proteins necessary for viral pathogenesis and disease progression. Nef has been also implicated in viral infectivity and replication, however, the molecular mechanism of Nef-induced viral gene expression and replication is not clearly understood. Although involvement of heat shock proteins in viral pathogenesis has been reported earlier, a clear understanding of their role remains to be elucidated. Here we report for the first time that Nef not only interacts with heat shock protein 40 (Hsp40) but it also induces the expression of Hsp40 in HIV-1-infected cells. The interaction between Nef and Hsp40 is important for increased Hsp40 translocation into the nucleus of infected cells, which seems to facilitate viral gene expression by becoming part of the cyclin-dependent kinase 9-associated transcription complex regulating long terminal repeat-mediated gene expression. The finding is consistent with the failure of the nef-deleted virus to induce Hsp40, resulting in reduced virus production. Our data further shows that, whereas, Hsp40 overexpression induces viral gene expression, silencing of Hsp40 reduces the gene expression in a Nef-dependent manner. Thus our results clearly indicate that Hsp40 is crucial for Nef-mediated enhancement of viral gene expression and replication.