Human immunodeficiency virus type 1 (HIV-1) infection is highly specific for its human host. To study HIV-1 infection of the human nervous system, we have established a small animal model in which second-trimester (11 to 17.5 weeks) human fetal brain or neural retina is transplanted to the anterior chamber of the eye of immunosuppressed adult rats. The human xenografts vascularized, formed a blood-brain barrier, and differentiated, forming neurons and glia. The xenografts were infected with cell-free HIV-1 or with HIV-1-infected human monocytes. Analysis by polymerase chain reaction revealed HIV-1 sequences in DNA from xenograft tissue exposed to HIV-1 virions, and in situ hybridization demonstrated HIV-1 mRNA localized in macrophages and multinucleated giant cells. Pathological damage was observed only in neural xenografts containing HIV-1-infected human monocytes, supporting the hypothesis that these cells mediate neurotoxicity. This small animal model allows the study of direct and indirect effects of HIV-1 infection on developing human fetal neural tissues, and it should prove useful in evaluating antiviral therapies, which must ultimately target HIV-1 infection of the brain.