Rag2(-/-) gamma(C)(-/-) mice transplanted with human hematopoietic stem cells (DKO-hu-HSC mice) mimic aspects of human infection with human immunodeficiency virus type 1 (HIV-1), including sustained viral replication and CD4(+) T-cell decline. However, the extent of HIV-1 evolution during long-term infection in these humanized mice, a key feature of the natural infection, has not been assessed fully. In this study, we examined the types of genotypic and phenotypic changes in the viral env gene that occur in the viral populations of DKO-hu-HSC mice infected with the CCR5-tropic isolate HIV-1(JRCSF) for up to 44 weeks. The mean rate of divergence of viral populations in mice was similar to that observed in a cohort of humans during a similar period of infection. Many amino acid substitutions were common across mice, including losses of N-linked glycosylation sites and substitutions in the CD4 binding site and in CD4-induced epitopes, indicating common selective pressures between mice. In addition, env variants evolved sensitivity to antibodies directed at V3, suggesting a more open conformation for Env. This phenotypic change was associated with increased CD4 binding efficiency and was attributed to specific amino acid substitutions. In one mouse, env variants emerged that exhibited a CXCR4-tropic phenotype. These sequences were compartmentalized in the mesenteric lymph node. In summary, viral populations in these mice exhibited dynamic behavior that included sequence evolution, compartmentalization, and the appearance of distinct phenotypic changes. Thus, humanized mice offer a useful model for studying evolutionary processes of HIV-1 in a complex host environment.