Tetherin is an interferon-induced protein whose expression blocks the release of HIV-1 and other enveloped viral particles. The underlying mechanism by which tetherin functions and whether it directly or indirectly causes virion retention are unknown. Here, we elucidate the mechanism by which tetherin exerts its antiviral activity. We demonstrate, through mutational analyses and domain replacement experiments, that tetherin configuration rather than primary sequence is critical for antiviral activity. These findings allowed the design of a completely artificial protein, lacking sequence homology with native tetherin, that nevertheless mimicked its antiviral activity. We further show that tetherin is incorporated into HIV-1 particles as a parallel homodimer using either of its two membrane anchors. These results indicate that tetherin functions autonomously and directly and that infiltration of virion envelopes by one or both of tetherin's membrane anchors is necessary, and likely sufficient, to tether enveloped virus particles that bud through the plasma membrane.