HIV-1 infection has been rare in Estonia. In 2000, an explosive epidemic among injecting drug users was detected in the Eastern border region, resulting in 3603 newly reported cases by the end of 2003. The molecular epidemiology of the outbreak was studied to establish whether the Estonian epidemic is linked to the epidemics in Eastern Europe. Over 200 newly infected individuals were prospectively sampled from June 2000 to March 2002 in a geographically representative way, with known dates of diagnosis and information of probable route of transmission. Viral regions coding for two viral gene regions were directly sequenced from plasma viral RNA and phylogenetically analyzed. In addition, a larger region coding for the entire env gene was sequenced from one sample and studied for indications of possible recombinant structure. The Estonian HIV outbreak was found to be caused by simultaneous introduction of two strains: a minor subtype A strain very similar to the Eastern European subtype A strain (approximately 8% of cases), and a second major strain (77%) found to be most closely related to the CRF06-cpx strain, previously described only from African countries. The variability in the two clusters was very low, suggesting point source introductions. Ten percent of cases seemed to be newly generated recombinants of the A and CRF06-cpx strains. Analysis of viral diversification over time revealed a rate of change within the V3 region of 0.83%/year for the CRF06-cpx strain, consistent with findings from other subtypes. Due to the relatively frequently found novel recombinant forms, the Estonian HIV-1 epidemic may allow studies of coinfection and intersubtype recombination in detail.