The human immunodeficiency virus type 1 (HIV-1) Tat protein activates transcription elongation by stimulating the Tat-activated kinase (TAK/p-TEFb), a protein kinase composed of CDK9 and its cyclin partner, cyclin T1. CDK9 is able to hyperphosphorylate the carboxyl-terminal domain (CTD) of the large subunit of RNA polymerase during elongation. In addition to TAK, the transcription elongation factor Spt5 is required for the efficient activation of transcriptional elongation by Tat. To study the role of Spt5 in HIV transcription in more detail, we have developed a three-stage Tat-dependent transcription assay that permits the isolation of active preinitiation complexes, early-stage elongation complexes, and Tat-activated elongation complexes. Spt5 is recruited in the transcription complex shortly after initiation. After recruitment of Tat during elongation through the transactivation response element RNA, CDK9 is activated and induces hyperphosphorylation of Spt5 in parallel to the hyperphosphorylation of the CTD of RNA polymerase II. However, immunodepletion experiments demonstrate that Spt5 is not required for Tat-dependent activation of the kinase. Chase experiments using the Spt5-depleted extracts demonstrate that Spt5 is not required for early elongation. However, Spt5 plays an important role in late elongation by preventing the premature dissociation of RNA from the transcription complex at terminator sequences and reducing the amount of polymerase pausing at arrest sites, including bent DNA sequences. This novel biochemical function of Spt5 is analogous to the function of NusG, an elongation factor found in Escherichia coli that enhances RNA polymerase stability on templates and shows sequence similarity to Spt5.