The expression of the cytochrome P450 1A1 gene (cyp1a1) is regulated by the aryl hydrocarbon receptor (AhR), which is a ligand-activated transcription factor that mediates most toxic responses induced by 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD). In the nucleus, ligand-activated AhR binds to the xenobiotic response elements, initiating chromatin remodeling and recruitment of coregulators, leading to the formation of preinitiation complex followed by elongation. Here, we report that ligand-activated AhR recruits the positive transcription elongation factor (P-TEFb) and RNA polymerase II (RNA PII) to the cyp1a1 promoter with concomitant phosphorylation of the RNA PII carboxyl domain (CTD). Interestingly, the serine 2 and serine 5 of the heptapeptide repeats (YSPTSPS) were sequentially phosphorylated upon TCDD treatment. Inhibition of P-TEFb kinase activity by 5,6-dichloro-1-beta-d-ribofuranosyl-benzimidazole (DRB) suppressed CTD phosphorylation (especially serine 2 phosphorylation) and abolished processive elongation without disrupting the assembly of the preinitiation complex at the cyp1a1 promoter. Remarkably, we found that activation of NF-kappaB by TNF-alpha selectively inhibited TCDD-induced serine 2 phosphorylation in mouse liver cells, suggesting that residue-specific phosphorylation of RNA PII CTD at the cyp1a1 promoter is an important regulatory point upon which signal "cross-talk" converges. Finally, we show that ligand-activated AhR associated with P-TEFb through the C terminus of cyclin T1, suggesting that AhR recruit the P-TEFb to the cyp1a1 promoter whereupon its kinase subunit phosphorylates the RNA PII CTD.