We devised an experimental system to examine sequential events by which the human immunodeficiency virus type 1 (HIV-1) envelope glycoprotein (Env) interacts with CD4 and coreceptor to induce membrane fusion. Recombinant soluble CD4 (sCD4) activated fusion between effector cells expressing Env and target cells expressing coreceptor (CCR5 or CXCR4) but lacking CD4. sCD4-activated fusion was dose dependent, occurred comparably with two- and four-domain proteins, and demonstrated Env-coreceptor specificities parallel to those reported in conventional fusion and infectivity systems. Fusion activation occurred upon sCD4 preincubation and washing of the Env-expressing effector cells but not the coreceptor-bearing target cells, thereby demonstrating that sCD4 exerts its effects by acting on Env. These findings provide direct functional evidence for a sequential two-step model of Env-receptor interactions, whereby gp120 binds first to CD4 and becomes activated for subsequent functional interaction with coreceptor, leading to membrane fusion. We used the sCD4-activated system to explore neutralization by the anti-gp120 human monoclonal antibodies 17b and 48d. These antibodies reportedly bind conserved CD4-induced epitopes involved in coreceptor interactions but neutralize HIV-1 infection only weakly. We found that 17b and 48d had minimal effects in the standard cell fusion system using target cells expressing both CD4 and coreceptor but potently blocked sCD4-activated fusion with target cells expressing coreceptor alone. Both antibodies strongly inhibited sCD4-activated fusion by Envs from genetically diverse HIV-1 isolates. Thus, the sCD4-activated system reveals conserved Env-blocking epitopes that are masked in native Env and hence not readily detected by conventional systems.