Transcription factors regulate eukaryotic RNA polymerase II (Pol II) activity by assembling and remodeling complexes at multiple steps in the transcription cycle. In HIV, we previously proposed a two-step model where the viral Tat protein first preassembles at the promoter with an inactive P-TEFb:7SK snRNP complex and later transfers P-TEFb to TAR on the nascent transcript, displacing the inhibitory snRNP and resulting in Pol II phosphorylation and stimulation of elongation. It is unknown how the Tat:P-TEFb complex transitions to TAR to activate the P-TEFb kinase. Here, we show that P-TEFb artificially recruited to the nascent transcript is not competent for transcription but rather remains inactive due to its assembly with the 7SK snRNP. Tat supplied in trans is able to displace the kinase inhibitor Hexim1 from the snRNP and activate P-TEFb, thereby uncoupling Tat requirements for kinase activation and TAR binding. By combining comprehensive mutagenesis of Tat with multiple cell-based reporter assays that probe the activity of Tat in different arrangements, we genetically defined a transition step in which preassembled Tat:P-TEFb complexes switch to TAR. We propose that a conserved network of residues in Tat has evolved to control this transition and thereby switch the host elongation machinery to viral transcription.