Three viral proteins participate in the down-modulation of CD4 in human immunodeficiency virus type 1 (HIV-1)-infected cells. The underlying mechanisms have been extensively investigated. However, the physiological relevance of this phenomenon remains poorly understood. To address the role of CD4 down-modulation in HIV-1 pathogenesis in vivo, we have characterized the functional properties of nef alleles isolated from seven HIV-1-infected patients at either the stage of AIDS (late alleles) or during the asymptomatic phase of infection (early alleles). HIV-1 variants carrying these nef alleles showed striking differences in CD4 down-modulation, virus infectivity, and replication properties. Infection of T cells with late strains resulted in production of viral particles with enhanced infectivity, as compared with variants carrying early nef alleles. These differences in infectivity were observed only when viruses were produced in cells with high levels of the viral receptor, suggesting a functional link between CD4 levels and the ability of Nef to down-modulate CD4 and to enhance viral infectivity. Similarly, late nef alleles were substantially more active than early nef genes in stimulating HIV-1 replication in high CD4-positive cells, including primary lymphocytes, but not in cells expressing low levels of the CD4 receptor. Single-round assays showed that differences in infectivity between late and early strains are largely reduced when evaluated in target cells with high levels of CD4, suggesting that the inhibitory effect occurs at the entry step. Supporting this, enhanced CD4 down-modulation by late nef alleles was associated with higher levels of envelope incorporation into viral particles, a phenomenon that likely accounted for the augmented infectivity. Our data suggest a mechanistic link between the Nef-mediated CD4 down-modulation and the enhancement of replication in CD4-positive lymphocytes. As progression to disease occurs, HIV-1 Nef variants with enhanced ability to down-modulate CD4 are selected. These strains efficiently overcome the deleterious effects of CD4 and replicate more aggressively in CD4-positive primary lymphocytes. These results highlight the importance of the virus-induced CD4 down-modulation in HIV-1 pathogenesis.