The positive transcriptional elongation factor b (P-TEFb), consisting of CDK9 and cyclin T, stimulates transcription by phosphorylating RNA polymerase II. It becomes inactivated when associated with the abundant 7SK snRNA. Here, we show that the 7SK binding alone was not sufficient to inhibit P-TEFb. P-TEFb was inhibited by the HEXIM1 protein in a process that specifically required 7SK for mediating the HEXIM1:P-TEFb interaction. This allowed HEXIM1 to inhibit transcription both in vivo and in vitro. P-TEFb dissociated from HEXIM1 and 7SK in cells undergoing stress response, increasing the level of active P-TEFb for stress-induced transcription. P-TEFb was the predominant HEXIM1-associated protein factor, and thus likely to be the principal target of inhibition coordinated by HEXIM1 and 7SK. Since HEXIM1 expression is induced in cells treated with hexamethylene bisacetamide, a potent inducer of cell differentiation, targeting the general transcription factor P-TEFb by HEXIM1/7SK may contribute to the global control of cell growth and differentiation.