Peptide T is currently in phase II clinical trials for the treatment of AIDS-associated dementia. Its putative mode of action is inhibition of binding of the HIV envelope protein (gp120) to its cellular receptor (CD4), thus preventing viral infectivity and gp120-induced neuronal toxicity. However, a number of reports have appeared in the literature which have failed to observe any inhibitory activity of Peptide T on CD4-gp120 binding, thus casting doubt on this hypothesis. This study uses a novel biosensor technique to demonstrate that Peptide T does bind to CD4 and that this binding can be specifically inhibited by an anti-CD4 monoclonal antibody. A detailed analysis of the kinetics of the interaction is presented.