The type 1 human immunodeficiency virus (HIV-1) encodes a 27-kDa protein termed Nef (negative factor). Nef has been reported to down-regulate viral gene transcription directed by the HIV-1 long terminal repeat. To assess the possible role of Nef in the initiation or maintenance of viral latency, we prepared two different nef expression vectors (pNEF from the HXB-3 proviral clone; pNEF-2/3 from HXB-2 and HXB-3) and a control vector containing a frameshift mutation in the HXB-3 nef coding sequence (pNEF-fs). Consistent with prior studies, the Nef proteins produced by pNEF and pNEF-2/3 were approximately 27 kDa in size, posttranslationally modified by myristoylation, and primarily associated with cytoplasmic membrane structures. However, in contrast to previous reports, these Nef proteins failed to inhibit transcriptional activity of the HIV-1 long terminal repeat in any of a variety of cell types, including primary human T lymphocytes, Jurkat or YT-1 leukemic T cells, U-937 promonocytic cells, and nonlymphoid COS cells. Furthermore, HXB-3 proviral clones of HIV-1 containing either a wild-type or mutated version of the nef gene replicated in an indistinguishable manner when transfected into COS cells. Our findings suggest that Nef is neither a transcriptional inhibitor nor a negative viral factor under these assay conditions. Rather, we suggest that the primary biological function of this conserved HIV-1 protein has yet to be defined, perhaps reflecting an intrinsic shortcoming in the in vitro experimental systems presently available for the study of HIV-1.