The HIV-1 Tat protein hijacks P-TEFb kinase to activate paused RNA polymerase II (RNAP II) at the viral promoter. Tat binds additional host factors, but it is unclear how they regulate RNAP II elongation. Here, we identify the cytoplasmic ubiquitin ligase UBE2O as critical for Tat transcriptional activity. Tat hijacks UBE2O to ubiquitinate the P-TEFb kinase inhibitor HEXIM1 of the 7SK snRNP, a fraction of which also resides in the cytoplasm bound to P-TEFb. HEXIM1 ubiquitination sequesters it in the cytoplasm and releases P-TEFb from the inhibitory 7SK complex. Free P-TEFb then becomes enriched in chromatin, a process that is also stimulated by treating cells with a CDK9 inhibitor. Finally, we demonstrate that UBE2O is critical for P-TEFb recruitment to the HIV-1 promoter. Together, the data support a unique model of elongation control where non-degradative ubiquitination of nuclear and cytoplasmic 7SK snRNP pools increases P-TEFb levels for transcriptional activation.