To obtain insight into the factors involved in vertical transmission, we compared the sequence diversity, seroreactivity, and biological characteristics of human immunodeficiency virus type 1 (HIV-1) derived from a transmitter and nontransmitter mother pair. Forty-two clones from the transmitter and 20 from the nontransmitter, spanning the principal neutralization determinant (PND) of the env gene, were sequenced and analyzed. The intrapatient sequence variation in transmitter and nontransmitter viruses was 12% and 36%, respectively, and the interpatient variation was 38%. In an effort to correlate immune responses to viral genetics, we analyzed the sera from these patients against a number of V3 peptides from known HIV-1 isolates. We observed that (i) both the transmitter and nontransmitter sera demonstrated higher binding to V3 peptides based on SF-2 and MN sequences than to IIIB and Z6 isolates; (ii) the vertical transmission of HIV-1 is correlated with the absence of high maternal antibody responses to the PND; and (iii) the high-affinity binding of the sera to SF-2 and MN V3 peptides correlated with the sequence analysis, indicating that the V3 sequences from both patients are more closely related to ADA, SF-162, and MN than to IIIB or Z6. Biological analysis of the viruses from these patients demonstrate that the transmitters' viruses infect a number of T-cell lines in vitro, whereas the nontransmitter viruses do not infect cell lines or the primary lymphocytes.