HIV-1 particle production occurs in a series of steps promoted by the viral Gag protein. Although it is well established that assembly and release take place at the plasma membrane, the nature of membrane assembly sites remains poorly understood. We show here that Gag specifically associates with cholesterol-enriched microdomains (“rafts”) at the plasma membrane. Kinetic studies demonstrate that raft association follows membrane binding, and the analysis of Gag mutants reveals that, whereas the N terminus of Gag mediates raft binding, this association is greatly enhanced by Gag–Gag interaction domains. We observe that depletion of cellular cholesterol markedly and specifically reduces HIV-1 particle production. Furthermore, treatment of virus-producing cells or virus particles with raft-disrupting agents significantly impairs virus infectivity. These results identify the association of Gag with plasma membrane rafts as an important step in HIV-1 replication. These findings may lead to novel strategies for suppressing HIV-1 replication in vivo.