Apolipoprotein E (ApoE) belongs to a class of cellular proteins involved in lipid metabolism. ApoE is a polymorphic protein produced primarily in macrophages and astrocytes. Different isoforms of ApoE have been associated with susceptibility to various diseases including Alzheimer's and cardiovascular diseases. ApoE expression has also been found to affect susceptibility to several viral diseases, including Hepatitis C and E, but its effect on the life cycle of HIV-1 remains obscure. In this study, we initially found that HIV-1 infection selectively up-regulated ApoE in human monocyte-derived macrophages (MDMs). Interestingly, ApoE knockdown in MDMs enhanced the production and infectivity of HIV-1, and was associated with increased localization of viral envelope (Env) proteins to the cell surface. Consistent with this, ApoE over-expression in 293T cells suppressed Env expression and viral infectivity, which was also observed with HIV-2 Env, but not with VSV-G Env. Mechanistic studies revealed that the C-terminal region of ApoE was required for its inhibitory effect on HIV-1 Env expression. Moreover, we found that ApoE and Env co-localized in the cells, and ApoE associated with gp160, the precursor form of Env, and that the suppression of Env expression by ApoE was cancelled by the treatment with lysosomal inhibitors. Overall, our study revealed that ApoE is an HIV-1-inducible inhibitor of viral production and infectivity in macrophages that exerts its anti-HIV-1 activity through association with gp160 Env via the C-terminal region, which results in subsequent degradation of gp160 Env in the lysosomes.