A new mutant human papillomavirus type 16 E7 gene, termed HPV16 HBE7, was isolated from cervical carcinoma biopsy samples from patients in an area with high incidence of cervical cancer (Hubei province, China). A previous study showed that the HPV16 HBE7 protein was primarily cytoplasmic while wild-type HPV16 E7 protein, termed HPV16 WE7, was concentrated in the nucleus. With the aim of studying the biological functions of HPV16 HBE7, the transforming potential of HPV16 HBE7 in NIH/3T3 cells was detected through observation of cell morphology, cell proliferation assay and anchorage-independent growth assay. The effect of HPV16 HBE7 on cell cycle was examined by flow cytometry. Dual-luciferase reporter assay and RT-PCR were used to investigate the influence of HPV16 HBE7 protein on the expression of regulation factors associated with G1/S checkpoint. The results showed that HPV16 HBE7 protein, as well as HPV16 WE7 protein, held transformation activity. NIH/3T3 cells expressing HPV16 HBE7 could easily transition from G1 phase into S phase and expressed high level of cyclin A and cdc25A. These results indicated HPV16 mutant E7 protein, located in the cytoplasm, induces oncogenic transformation of NIH/3T3 cells via up-regulation of cyclin A and cdc25A.