Current clinical gene therapy protocols for the treatment of human immunodeficiency virus type 1 (HIV-1) infection involve the ex vivo transduction and expansion of CD4+ T cells derived from HIV-positive patients at a late stage in their disease (CD4+ cell count <400 cells/mm3). We examined the efficiency of transduction and transgene expression in adult bone marrow (BM)- and umbilical cord blood (UCB)-derived CD34+ cells induced to differentiate into T cells and monocytes in vitro with an MuLV-based vector encoding the neomycin resistance gene and an intracellular antibody directed against the Tat protein of HIV-1 (sFvtat1-Ckappa). The expression of the marker gene and the effects of antiviral construct on subsequent challenge with monocytotropic and T cell-tropic HIV-1 isolates were monitored in vitro in purified T cells and monocytes generated in culture from the transduced CD34+ cells. Transduction efficiencies of CD34+ cells ranged between 22 and 27%. Differentiation of CD34+ cells into T cells or monocytes was not significantly altered by the transduction process. HIV-1 replication in monocytes and CD4+ T cells derived from CD34+ cells transduced with the intracellular antibody gene was significantly reduced in comparison with the degree of HIV replication seen in monocytes and CD4+ T cells derived from CD34+ cells transduced with the neomycin resistance gene alone. Further, T cells and monocytes derived from CD34+ cells transduced with the intracellular antibody gene were demonstrated to express the sFvtat1-Ckappa transgene by RT-PCR and had a selective growth advantage in cultures that had been challenged with HIV-1. These data demonstrate that sFvtat1-Ckappa inhibits HIV-1 replication in T cells and monocytes developing from CD34+ cells and supports the continuing development of a stem cell gene therapy for the treatment of HIV-1 infection.