HIV-1 Nef is a major determinant in HIV-1 pathogenicity. However, its properties have mainly been associated with its biochemical activities within the producer cell. Nef is also secreted from infected and transfected cells. Our primary objective was to determine the nature of secreted Nef protein and its effect on target cells. We determined that HIV-1 Nef is secreted in the form of exosome-like vesicles. Nef protein present in these vesicles is largely protected from protease digestion, which suggests that most of the protein is present on the lumenal side of the vesicles. We observed that HEK293 cells, transfected with a Nef-GFP expression vector, can secrete vesicles containing Nef-GFP fusion protein into the extracellular medium. When the conditioned medium was used to treat Jurkat cells, we found that the cells can take up the Nef fusion protein. The pattern of distribution of the Nef-GFP fusion protein within the target cells is mainly cytoplasmic and results in a punctate staining pattern. We also observed that Nef (-) virions treated with Nef-conditioned medium have their infectivity restored to near wild-type levels. This implies that the Nef contained within vesicles has the ability to fuse with HIV-1 virions and deliver functional Nef to these virions. It also demonstrates that Nef protein delivered in trans can restore infectivity even after virion maturation has occurred. These studies suggest that secreted Nef could play a role in HIV-1 pathogenesis by inducing effects in noninfected bystander cells.