Maturation and release of human immunodeficiency virus type 1 (HIV-1) is targeted at the pseudopod of infected mononuclear cells. However, the intracellular mechanism or targeting signals leading to this polarized viral maturation are yet to be identified. We have recently demonstrated the presence of a functional YXXL motif for specific targeting of HIV-1 virions to the basolateral membrane surface in polarized epithelial Madin-Darby canine kidney cells (MDCK). Site-directed mutagenesis was used to demonstrate that the membrane-proximal tyrosine in the intracytoplasmic tail of the HIV-1 transmembrane glycoprotein (gp41) is an essential component of this signal. In the present study, immunolocalization of viral budding allowed us to establish that this tyrosine-based signal is involved in determining the exact site of viral release at the surface of infected mononuclear cells. Substitution of the critical tyrosine residue was also shown to increase the amount of envelope glycoprotein at the cell surface, supporting previous suggestions that the tyrosine-based motif can promote endocytosis. Although alteration of the dual polarization-endocytosis motif did not affect the infectivity of cell-free virus, it could play a key role in cell-to-cell viral transmission. Accordingly, chronically infected lymphocytes showed a reduced ability to transmit the mutant virus to a cocultivated cell line. Overall, our data indicate that the YXXL targeting motif of HIV is active in various cell types and could play an important role in viral propagation; this may constitute an alternative target for HIV therapeutics and vaccine development.