The newly identified type III interferon (IFN-lambda) has antiviral activity against a broad spectrum of viruses. We thus examined whether IFN-lambda has the ability to inhibit human immunodeficiency virus type 1 (HIV-1) infection of blood monocyte-derived macrophages that expressed IFN-lambda receptors. Both IFN-lambda1 and IFN-lambda2, when added to macrophage cultures, inhibited HIV-1 infection and replication. This IFN-lambda-mediated anti-HIV-1 activity is broad, as IFN-lambda could inhibit infection by both laboratory-adapted and clinical strains of HIV-1. Investigations of the mechanism(s) responsible for the IFN-lambda action showed that although IFN-lambda had little effect on HIV-1 entry coreceptor CCR5 expression, IFN-lambda induced the expression of CC chemokines, the ligands for CCR5. In addition, IFN-lambda upregulated intracellular expression of type I IFNs and APOBEC3G/3F, the newly identified anti-HIV-1 cellular factors. These data provide direct and compelling evidence that IFN-lambda, through both extracellular and intracellular antiviral mechanisms, inhibits HIV-1 replication in macrophages. These findings indicate that IFN-lambda may have therapeutic value in the treatment of HIV-1 infection.