Peptides representing a sequence of 23 amino acid residues at the N terminus of human immunodeficiency virus type 1 (HIV-1) envelope glycoprotein gp41 bind and subsequently induce fusion of large unilamellar vesicles (LUV), an activity presumably related to gp41 function in viral infection. These in vitro effects can be modulated by several factors that are known to affect HIV-1 infectivity and gp41-mediated virus-cell fusion. Peptide-induced membrane fusion but not peptide binding can be inhibited by two factors known to block gp41 activity: a polar amino acid substitution V --> E in position 2 and the presence of the N-terminal hexapeptide of gp41 in addition to the parent sequence. Whereas inclusion of the alternative gp120 receptor galactosylceramide in membranes has virtually no effect, membrane cholesterol stimulates fusion activity. In view of its putative physiological relevance, we have used the fusion activity of the peptides as a tool to evaluate the inhibitory effect of antivirals that might target this sequence. We describe three dissimilar effects: Amphotericin B inhibits in a cholesterol-independent way peptide-induced fusion but not binding, human serum albumin inhibits binding and consequently fusion, and dextran sulfate (M(r) 5000) does not affect either binding or fusion.