Progressive central nervous system dysfunction analogous to the AIDS dementia complex (ADC) seen in adults (HIV-1-associated progressive encephalopathy or HIV-1 encephalopathy) commonly occurs in HIV-1-infected children. The cause appears to be directly or indirectly related to HIV-1, rather than to other opportunistic pathogens. The exact mechanism(s) by which the virus affects brain function is not known. To determine whether the virus might modify brain function via an alteration in cortical neurons, we examined peptide neurotransmitter expression in the frontal cortex of HIV-1-infected cases with clinical HIV-1 encephalopathy relative to pathologic HIV-1 encephalitis. In situ hybridization was used to determine the level of peptide neurotransmitter expression of somatostatin in the frontal cortex of cases with and without HIV-1 encephalopathy and/or HIV-1 encephalitis. A 2-fold higher number of preprosomatostatin mRNA-positive interneurons was present in layer IV of cases with HIV-1 encephalitis compared with cases without HIV-1 encephalitis. In cases with PE, this neuronal alteration was 4- to 5-fold higher than in cases without PE, and was present in subcortical white matter in addition to layer IV. In cases having both PE and HIV-1 encephalitis, and in cases with HIV-1 encephalitis alone, these neuronal alterations in layer IV and/or subcortical white matter related to disseminated microglial nodules, even when these potentially viral-infected cells were negative for HIV-1 p24 antigen, a marker of productive viral infection. An alteration in preprosomatostatin mRNA-expressing cells occurring with HIV-1 encephalitis may be at least one mechanism that contributes to HIV-1 encephalopathy. When compared with other cortical laminae, layer IV receives most of its synaptic input from the mediodorsal nucleus of the thalamus. Neurons in the subcortical white matter project to the thalamus. The thalamus has been shown to have high amounts of viral antigen and increased metabolic activity in patients with AIDS. An alteration in preprosomatostatin mRNA-expressing cells may play a role in HIV-1 encephalopathy.