HIV infections are initiated by a limited number of variants that diverge into a diverse quasispecies swarm. During in utero mother-to-child transmission (IU MTCT), transmitted viral variants must pass through multiple unique environments, and our previously published data suggest a nonstochastic model of transmission. As an alternative to a stochastic model of viral transmission, we hypothesize that viral selection in the placental environment influences the character of the viral quasispecies when HIV-1 is transmitted in utero. To test this hypothesis, we used single-template amplification to isolate HIV-1 envelope gene (env) sequences from both peripheral plasma and the placentas of eight nontransmitting (NT) and nine IU-transmitting participants. Statistically significant compartmentalization between peripheral and placental HIV-1 env was detected in one of the eight NT cases and six of the nine IU MTCT cases. In addition, viral sequences isolated from IU MTCT placental tissue showed variation in env V1 loop lengths compared to matched maternal sequences, while NT placental env sequences did not. Finally, comparison of env sequences from NT and IU MTCT participants indicated statistically significant differences in Kyte-Doolittle hydropathy in the signal peptide, C2, V3, and C3 regions. Our working hypothesis is that the hydropathy differences in Env associated with IU MTCT alter viral cellular tropism or affinity, allowing HIV-1 to efficiently infect placentally localized cells.