The human immunodeficiency virus type-1 Vif protein has a crucial role in regulating viral infectivity. However, we found that newly synthesized Vif is rapidly degraded by cellular proteases. We tested the dose dependence of Vif in non-permissive H9 cells and found that Vif, when expressed at low levels, increased virus infectivity in a dose-dependent manner. Surprisingly, however, the range of Vif required for optimal virus infectivity was narrow, and further increases in Vif severely reduced viral infectivity. Inhibition of viral infectivity at higher levels of Vif was cell type-independent and was associated with an accumulation of Gag-processing intermediates. Vif did not act as a general protease inhibitor but selectively inhibited Gag processing at the capsid and nucleocapsid (NC) boundary. Identification of Vif variants that were efficiently packaged but were unable to modulate Gag processing suggests that Vif packaging was necessary but insufficient for the production of 33- and 34-kDa processing intermediates. Interestingly, these processing intermediates, like Vif, associated with viral nucleoprotein complexes more rigidly than mature capsid and NC. We conclude that virus-associated Vif inhibits processing of a subset of Gag precursor molecules at the p2/NC primary cleavage site. Modulation of processing of a small subset of Gag molecules by physiological levels of Vif may be important for virus maturation. However, the accumulation of such processing intermediates at high levels of Vif is inhibitory. Thus, rapid intracellular degradation of Vif may have evolved as a mechanism to prevent such inhibitory effects of Vif.