Cytokines and IFNs, such as TNF-α and IFN-α, upregulate costimulatory molecules in monocyte-derived dendritic cells (MDDCs), enabling effective Ag presentation to T cells. This activation of MDDCs is often accompanied by upregulation of apolipoprotein B mRNA-editing, enzyme-catalytic, polypeptide-like 3 (APOBEC3) (A3) family proteins that are able to restrict HIV-1 replication in MDDCs by inducing hypermutations in the viral genome. In this study, we show that TNF-α upregulates costimulatory molecules and are able to restrict HIV-1BaL replication in MDDCs without significant induction of A3G, A3A, or A3F. Conversely, low quantities of IFN-α failed to upregulate costimulatory molecules, did not induce IL-12p40 or migration, but significantly induced A3G, A3A, and A3F mRNA expression and restricted viral replication in MDDCs. We also showed that transmission of HIV-1 from MDDCs to autologous T cells was significantly reduced in the presence of IFN-α. Sequence analyses detected the induction of high frequency of G-to-A hypermutations in the env genes from HIV-1BaL-infected MDDCs treated with low quantities of IFN-α2b. These findings show that low quantities of IFN-α can induce functional A3 family proteins and restrict HIV-1 replication in MDDCs while keeping an immature nonmigratory phenotype, supporting further investigations of modalities that enhance retroviral restriction factors. In addition, the findings highlight the role of IFN-α as a double-edged sword in HIV-1 infection, and we show that IFN-α can be powerful in reducing HIV-1 infection both in MDDCs and T cells.