T20 (Fuzeon), a novel anti-human immunodeficiency virus (HIV) drug, is a peptide derived from HIV-1 gp41 C-terminal heptad repeat (CHR). Its mechanism of action has not yet been defined. We applied Pepscan strategy to determine the relationship between functional domains and mechanisms of action of five 36-mer overlapping peptides with a shift of five amino acids (aa): CHR-1 (aa 623-658), C36 (aa 628-663), CHR-3 (aa 633-668), T20 (aa 638-673), and CHR-5 (aa 643-678). C36 is a peptide with addition of two aa to the N terminus of C34. Peptides CHR-1 and C36 contain N-terminal heptad repeat (NHR)- and pocket-binding domains. They inhibited HIV-1 fusion by interacting with gp41 NHR, forming stable six-helix bundles and blocking gp41 core formation. Peptide T20 containing partial NHR- and lipid-binding domains, but lacking pocket-binding domain, blocked viral fusion by binding its N- and C-terminal sequences with gp41 NHR and cell membrane, respectively. Peptide CHR-3, which is located in the middle between C36 and T20, overlaps >86% of the sequences of these two peptides, and lacks pocket- and lipid-binding domains, exhibited marginal anti-HIV-1 activity. These results suggest that T20 and C36 contain different functional domains, through which they inhibit HIV-1 entry with distinct mechanisms of action. The multiple functional domains in gp41 CHR and their binding partners may serve as targets for rational design of new anti-HIV-1 drugs and vaccines.