The peptidic compound, N-acetyl-Arg-Lys-Lys-Arg-Arg-Gln-Arg-Arg-Arg-Cys(biotin)-NH2 (Tat10-biotin), contains the 9-amino acid sequence from the basic domain of the Tat protein responsible for specific interaction with TAR RNA. The cysteine residue provides an attachment site for biotin, which acts as a cellular uptake enhancer. Tat10-biotin binds a fragment of TAR RNA (deltaTAR) avidly and specifically, as measured in an electrophoretic gel shift assay. Tat10-biotin inhibited tat gene-induced expression of a stably transfected chloramphenicol acetyl transferase (CAT) reporter gene linked to the HIV-1 long terminal repeat (LTR) in a model cell assay, but did not inhibit phorbol ester-induced expression of CAT, thereby demonstrating a Tat-dependent mechanism of inhibition. Inhibition of HIV-1 replication after acute infection of MT2 cells was demonstrated by absence of HIV-induced syncytium formation and cytotoxicity, as well as by suppression of reverse transcriptase production. These results suggest that a peptide or peptide mimetic capable of competing with the TAR RNA-binding domain of Tat protein might be useful as a therapeutic agent for AIDS.