The major neutralizing epitope on the external glycoprotein of HIV-1 was studied with an envelope-specific monoclonal antibody and with a human serum positive for antibodies to HIV-1 proteins, both of which were able to neutralize virus infectivity. The monoclonal antibody reacted specifically with gp120 from HIV-1IIIB, and was shown to neutralize infection of CEM cells by cell-free virions, and inhibited the formation of syncytia normally observed when uninfected cells are cocultured with HIV-1-infected cells. Similar neutralization of viral infection and inhibition of syncytia formation was also demonstrated by the HIV-1-antibody-positive human serum. By examining a number of overlapping peptides from a region of HIV-1 gp120 known to contain a neutralizing epitope, this epitope was localized between amino acids 307 and 320 (V3 loop) in the external glycoprotein molecule. The monoclonal antibody did not interfere with the binding of gp120 to CD4, or with the subsequent step of CD4-induced shedding of gp120 from the viral envelope. However, it blocked the proteolytic cleavage of the V3 loop by thrombin, suggesting that the antibody may be inhibiting the interaction of the loop with other membrane-bound proteins.