Human papillomaviruses (HPV) 16 is a DNA virus encoding three oncogenes--E5, E6, and E7. The E6 and E7 proteins have well-established roles as inhibitors of tumor suppression, but the contribution of E5 to malignant transformation is controversial. Using spontaneously immortalized human keratinocytes (HaCaT cells), we demonstrate that expression of HPV16 E5 is necessary and sufficient for the formation of bi-nucleated cells, a common characteristic of precancerous cervical lesions. Expression of E5 from non-carcinogenic HPV6b does not produce bi-nucleate cells. Video microscopy and biochemical analyses reveal that bi-nucleates arise through cell-cell fusion. Although most E5-induced bi-nucleates fail to propagate, co-expression of HPV16 E6/E7 enhances the proliferation of these cells. Expression of HPV16 E6/E7 also increases bi-nucleated cell colony formation. These findings identify a new role for HPV16 E5 and support a model in which complementary roles of the HPV16 oncogenes lead to the induction of carcinogenesis.