We have prepared stable cell lines, derived from Vero cells and A3.01 cells, that express a hybrid human alpha 2-interferon gene under control of the human immunodeficiency virus (HIV) long terminal repeat. These cells constitutively produced low levels (50-150 units/ml) of alpha 2-interferon. However, high levels of interferon (10(3) units/ml) could be induced upon trans-activation by the product of the tat gene (pIIIextatIII), and de novo infection by HIV resulted in a moderate increase (400 units/ml) in alpha 2-interferon synthesis. In contrast to the fully permissive HIV replication, in transfected Vero cells or infected A3.01 cells, the transcription and replication of HIV in Vero or A3.01 cells containing the HIV long terminal repeat--alpha 2-interferon hybrid gene (VN89 and A3N89 cells, respectively) was completely inhibited. These data suggest that virus-trans-activated alpha 2-interferon synthesis can be used as a selective inhibitor of HIV replication.