GB virus type C (GBV-C) is a single-stranded positive-sense RNA virus classified in the Flaviviridae family. Persistent coinfection with GBV-C is associated with lower human immunodeficiency virus type 1 (HIV-1) load, higher CD4(+) T-cell count, and prolonged survival in HIV-1 coinfected patients. The GBV-C envelope glycoprotein E2 has been reported to interfere with HIV-1 entry. In this study, we showed that the expression of GBV-C E2 inhibited HIV-1 Gag assembly and release. Expression of glycosylated GBV-C E2 inhibited HIV-1 Gag precursor processing, resulting in lower production of CAp24 and MAp17, while the overall expression level of the Gag precursor Pr55 remained unchanged. Membrane floatation gradient and indirect immunofluorescence confocal microscopy analysis showed that glycosylated E2 disrupted HIV-1 Gag trafficking to the plasma membrane, resulting in Gag accumulation in subcellular compartments. This interference in HIV-1 Gag trafficking led to diminished HIV-1 particle production, which is a critical step for HIV-1 to infect new host cells. These findings shed light on a novel mechanism used by GBV-C E2 to inhibit HIV-1 replication and may provide insight into new approaches for suppressing HIV-1 replication.