Sifuvirtide (SFT) is an electrostatically constrained α-helical peptide fusion inhibitor showing potent anti-HIV activity, good safety, and pharmacokinetic profiles, and it is currently under phase II clinical trials in China. In this study, we demonstrate its potent and broad anti-HIV activity by using diverse HIV-1 subtypes and variants, including subtypes A, B, and C that dominate the AIDS epidemic worldwide, and subtypes B', CRF07_BC, and CRF01_AE recombinants that are currently circulating in China, and those possessing cross-resistance to the first and second generation fusion inhibitors. To elucidate its mechanism of action, we determined the crystal structure of SFT in complex with its target N-terminal heptad repeat region (NHR) peptide (N36), which fully supports our rational inhibitor design and reveals its key motifs and residues responsible for the stability and anti-HIV activity. As anticipated, SFT adopts fully helical conformation stabilized by the multiple engineered salt bridges. The designing of SFT also provide novel inter-helical salt bridges and hydrogen bonds that improve the affinity of SFT to NHR trimer. The extra serine residue and acetyl group stabilize α-helicity of the N-terminal portion of SFT, whereas Thr-119 serves to stabilize the hydrophobic NHR pocket. In addition, our structure demonstrates that the residues critical for drug resistance, located at positions 37, 38, 41, and 43 of NHR, are irreplaceable for maintaining the stable fusogenic six-helix bundle structure. Our data present important information for developing SFT for clinical use and for designing novel HIV fusion inhibitors.