CD8(+) T lymphocytes can suppress human immunodeficiency virus type 1 (HIV-1) replication by secreting a soluble factor(s) known as CD8(+) T-lymphocyte antiviral factor (CAF). One site of CAF action is inhibition of HIV-1 RNA transcription, particularly at the step of long terminal repeat (LTR)-driven gene expression. However, the mechanism by which CAF inhibits LTR activation is not understood. Here, we show that conditioned media from several herpesvirus saimari-transformed CD8(+) T lymphocytes inhibit, in a time- and dose-dependent manner, the replication of HIV-1 pseudotype viruses that express the envelope glycoproteins of vesicular stomatitis virus (HIV-1(VSV)). The same conditioned media also inhibit phorbol myristate acetate-induced activation of the HIV-1 LTR and activate the signal transducer and activator of transcription 1 (STAT1) protein. We have obtained direct evidence that STAT1 is necessary for CAF-mediated inhibition of LTR activation and HIV-1 replication. Thus, the inhibitory effect of CAF on HIV-1(VSV) replication was abolished in STAT1-deficient cells. Moreover, CAF inhibition of LTR activation was diminished both in STAT1-deficient cells and in cells expressing a STAT1 dominant negative mutant but was restored when STAT1 was reintroduced into the STAT1-deficient cells. We also observed that CAF induced the expression of interferon regulatory factor 1 (IRF-1), and that IRF-1 gene induction was STAT-1 dependent. Taken together, our results suggest that CAF activates STAT1, leading to IRF-1 induction and inhibition of gene expression regulated by the HIV-1 LTR. This study therefore helps clarify one molecular mechanism of host defense against HIV-1.