During the assembly stage of the human immunodeficiency virus (HIV) replication cycle, several thousand copies of the viral Gag polyprotein associate at the cell membrane and bud to form an immature, non-infectious virion. Gag is subsequently cleaved by the protease, which liberates the capsid proteins for assembly into the polyprotein shell of the central core particle (or capsid) of the mature virus. Viral infectivity is critically dependent on capsid formation and stability, making the capsid protein a potentially attractive antiviral target. We have identified compounds that bind to an apical site on the N-terminal domain of the HIV-1 capsid protein and inhibit capsid assembly in vitro. One compound, N-(3-chloro-4-methylphenyl)-N'-[2-[([5-[(dimethylamino)-methyl]-2-furyl]-methyl)-sulfanyl]ethyl]urea) (CAP-1), is well tolerated in cell cultures, enabling in vivo antiviral and mechanistic studies. CAP-1 inhibits HIV-1 infectivity in a dose-dependent manner, but does not interfere with viral entry, reverse transcription, integration, proteolytic processing, or virus production, indicating a novel antiviral mechanism. Significantly, virus particles generated in the presence of CAP-1 exhibit heterogeneous sizes and abnormal core morphologies, consistent with inhibited CA-CA interactions during virus assembly and maturation. These findings lay the groundwork for the development of assembly inhibitors as a new class of therapeutic agents for the treatment of AIDS.