The retroviral structural protein, Gag, contains small peptide motifs known as late domains that promote efficient virus release from the infected cell. In addition to the well characterized PTAP late domain, the p6 region of HIV-1 Gag contains a binding site for the host cell protein Alix. To better understand the functional role of the Gag/Alix interaction, we overexpressed an Alix fragment composed of residues 364-716 (Alix 364-716) and examined the effect on release of wild type (WT) and Alix binding site mutant HIV-1. We observed that Alix 364-716 expression significantly inhibited WT virus release and Gag processing and that mutation of the Alix binding site largely relieved this inhibition. Furthermore, Alix 364-716 expression induced a severe defect on WT but not mutant particle morphology. Intriguingly, the impact of Alix 364-716 expression on HIV-1 release and Gag processing was markedly different from that induced by mutation of the Alix binding site in p6. The association of Alix 364-716 with HIV-1 and equine infectious anemia virus late domains was quantitatively evaluated by isothermal titration calorimetry and surface plasmon resonance techniques, and the effects of mutations in these viral sequences on Alix 364-716 binding was determined. This study identifies a novel Alix-derived dominant negative inhibitor of HIV-1 release and Gag processing and provides quantitative information on the interaction between Alix and viral late domains.