A large body of evidence has indicated that microglia are the predominant cellular location for HIV-1 in the brains of HIV-1-infected individuals and play a direct role in the development of HIV-1-associated dementia (HAD). Therefore, investigation of the mechanism by which HIV-1-infected microglia contribute to the development of HIV-associated dementia should be facilitated by the creation of a mouse model wherein microglia carry replication-competent HIV-1. To circumvent the inability of HIV-1 to infect mouse cells, we developed a mouse line that is transgenic for a full-length proviral clone of a monocyte-tropic HIV-1 isolate, HIV-1(JR-CSF) (JR-CSF mice), whose T cells and monocytes produce infectious HIV-1. We detected expression of the long terminal repeat-regulated proviral transgene in the microglia of these transgenic mice and demonstrated that it was increased by in vitro and in vivo stimulation with lipopolysaccharide. Furthermore, microglia isolated from JR-CSF mouse brains produced HIV-1 that was infectious in vitro and in vivo. We examined the effect that carriage of the HIV-1 provirus had on chemokine gene regulation in the brains of these mice and demonstrated that MCP-1 gene expression by JR-CSF mouse microglia and brains was more responsive to in vitro and in vivo stimulation with lipopolysaccharide than were microglia and brains from control mice. Thus, this study indicates that the JR-CSF mice may represent a new mouse model to study the effect of HIV-1 replication on microglia function and its contribution to HIV-1-associated neurological disease.