We studied the evolution and compartmentalization of nef/long terminal repeat (nef/LTR)-deleted human immunodeficiency virus type 1 (HIV-1) from a long-term survivor who developed HIV-associated dementia (HIVD). Analysis of sequential blood-derived HIV-1 isolated before and during HIVD revealed a persistent R5X4 phenotype and a progressive loss of nef/LTR sequence; in contrast, HIV-1 present in cerebrospinal fluid during HIVD had an R5 phenotype, distinct nef/LTR sequence of unique deletions and additional nuclear factor- kappa B sites and specificity factor-1 sites, and enhanced transcriptional activity, compared with the blood-derived isolates. Thus, nef/LTR-deleted HIV-1 strains may undergo compartmentalized evolution in long-term survivors and cause neurologic disease.