We previously demonstrated a high permissiveness of HTLV-II-transformed T lymphocytes (C3) to human immunodeficiency virus (HIV) infection in vitro, and that this infection results in the lysis of cells (D.C. Montefiori and W.M. Mitchell (1986) Virology 155, 726-731). We now show that a small percentage of HIV-infected C3 cells resist cell lysis, grow continuously in culture, and express antigens of both viruses. High levels of reverse transcriptase activity found in the culture fluid of these coinfected cells were associated with the presence of fully infectious HIV and an absence of detectable infectious HTLV-II. Virus production in C3 cells coinfected with the HIV isolate HTLV-III was approximately threefold greater than in C3 cells coinfected with the HIV isolate LAV, a result which suggests that HIV genomic diversity may give rise to differences in replicative capacities. Lysis resistance was found to be a cellular-determined function in that HIV produced in cultures of C3/HTLV-III cells retained the capacity to elicit a lytic response upon repeated infection. Small syncytia (less than five nuclei) were rarely observed in cultures of C3 and nonlytic C3/HIV cells, whereas large syncytia (more than five nuclei) were in abundance during the lytic phase of coinfection, a result which supports a role for syncytium formation in the mechanism of HIV-induced cytopathic effects. The results of these studies further demonstrate that there exists a lack of viral interference by HTLV-II infection, and that HTLV-II-transformed lymphocytes could act as a chronic reservoir for HIV in vivo.