HIV-1 virions are highly enriched in cholesterol relative to the cellular plasma membrane. We recently reported that a cholesterol-binding compound, amphotericin B methyl ester (AME), blocks HIV-1 entry and that single amino acid substitutions in the cytoplasmic tail of the transmembrane envelope glycoprotein gp41 confer resistance to AME. In this study, we defined the mechanism of resistance to AME. We observed that the gp41 in AME-resistant virions is substantially smaller than wild-type gp41. Remarkably, we found that this shift in gp41 size is due to cleavage of the gp41 cytoplasmic tail by the viral protease. We mapped the protease-mediated cleavage to two sites in the cytoplasmic tail and showed that gp41 truncations in this region also confer AME resistance. Thus, to escape the inhibitory effects of AME, HIV-1 evolved a mechanism of protease-mediated envelope glycoprotein cleavage used by several other retroviruses to activate envelope glycoprotein fusogenicity. In contrast to the mechanism of AME resistance observed for HIV-1, we demonstrate that simian immunodeficiency virus can escape from AME via the introduction of premature termination codons in the gp41 cytoplasmic tail coding region. These findings demonstrate that in human T cell lines, HIV-1 and simian immunodeficiency virus can evolve distinct strategies for evading AME, reflecting their differential requirements for the gp41 cytoplasmic tail in virus replication. These data reveal that HIV-1 can escape from an inhibitor of viral entry by acquiring mutations that cause the cytoplasmic tail of gp41 to be cleaved by the viral protease.