Masking of host cell receptors following retroviral infection is the basis for the phenomenon of virus interference. Amphotropic retrovirus vectors were used to express the HIV envelope glycoprotein in a human CD4+ cell line. Envelope expression is accompanied by a reduction in the level of surface CD4 receptor molecules and correlates with the presence of intracellular envelope-CD4 receptor complexes. Cells expressing the HIV envelope acquire a cytolysis-resistant phenotype such that infection with HIV leads to a non-cytopathic persistent virus infection. Furthermore, phorbol ester-mediated stimulation of viral replication in persistently infected cells results in renewed cytolytic effects which, due to the absence of CD4 in the cell population, are absolutely independent of syncytium formation. This study elucidates the mechanism by which viral persistence is initiated and maintained in the course of AIDS.