The rapid emergence of drug-resistant variants of human immunodeficiency virus, type 1 (HIV-1), has limited the efficacy of anti-acquired immune deficiency syndrome (AIDS) treatments, and new lead compounds that target novel binding sites are needed. We have determined the 3.15 A resolution crystal structure of HIV-1 reverse transcriptase (RT) complexed with dihydroxy benzoyl naphthyl hydrazone (DHBNH), an HIV-1 RT RNase H (RNH) inhibitor (RNHI). DHBNH is effective against a variety of drug-resistant HIV-1 RT mutants. While DHBNH has little effect on most aspects of RT-catalyzed DNA synthesis, at relatively high concentrations it does inhibit the initiation of RNA-primed DNA synthesis. Although primarily an RNHI, DHBNH binds >50 A away from the RNH active site, at a novel site near both the polymerase active site and the non-nucleoside RT inhibitor (NNRTI) binding pocket. When DHBNH binds, both Tyr181 and Tyr188 remain in the conformations seen in unliganded HIV-1 RT. DHBNH interacts with conserved residues (Asp186, Trp229) and has substantial interactions with the backbones of several less well-conserved residues. On the basis of this structure, we designed substituted DHBNH derivatives that interact with the NNRTI-binding pocket. These compounds inhibit both the polymerase and RNH activities of RT.