The linear peptide 12p1 (RINNIPWSEAMM) was previously isolated from a phage display library and was found to inhibit interaction of HIV-1 gp120 with both CD4 and a CCR5 surrogate, mAb 17b [Ferrer, M., and Harrison, S. (1999) J. Virol. 73, 5795-5802]. In this work, we investigated the mechanism that leads to this dual inhibition of gp120 binding. We found that there is a direct interaction of 12p1 with gp120, which occurs with a binding stoichiometry of 1:1. The peptide inhibits binding of monomeric YU2 gp120 to both sCD4 and 17b at IC(50) values of 1.1 and 1.6 microM, respectively. The 12p1 peptide also inhibited the binding of these ligands to trimeric envelope glycoproteins, blocked the binding of gp120 to the native coreceptor CCR5, and specifically inhibited HIV-1 infection of target cells in vitro. Analyses of sCD4 saturation of monomeric gp120 in the presence or absence of a fixed concentration of peptide suggest that 12p1 suppression of CD4 binding to gp120 is due to allosteric inhibitory effects rather than competitive inhibition of CD4 binding. Using a panel of gp120 mutants that exhibit weakened inhibition by 12p1, the putative binding site of the peptide was mapped to a region immediately adjacent to, but distinguishable from, the CD4 binding footprint. In the case of the peptide, the effects of single-12p1 residue substitutions and various peptide truncations indicate that the side chain of Trp7 and other structural elements of 12p1 are critical for gp120 binding or efficient inhibition of binding of a ligand to gp120. Finally, 12p1 was unable to inhibit binding of sCD4 to a gp120 mutant that is believed to resemble the CD4-induced conformation of gp120. These results suggest that 12p1 preferentially binds gp120 prior to engagement of CD4; binding of the peptide to gp120 limits the interaction with ligands (CD4 and CCR5) that are generally crucial for viral entry. More importantly, these results indicate that 12p1 binds to a unique site that may prove to be a prototypic target for novel CD4-gp120 inhibitors.