Immunization with either an Escherichia coli recombinant segment of the human T-cell lymphotropic virus (HTLV-III/LAV) envelope protein (gp 120) or with deglycosylated gp 120 envelope protein produced antibodies that neutralize HTLV-III/LAV infection in vitro. Virus neutralization titers of these antisera were equivalent to those obtained with purified native gp120 as immunogen. This localizes at least one class of neutralizing epitopes to the carboxyl-terminal half of the molecule. In addition, native gp120 prevented HTLV-III/LAV--mediated cell fusion, whereas the recombinant gp120 fragment did not. This shows that although glycosylation is not required for induction of neutralizing antibodies, it may be important for interaction with CD4, the virus receptor. A segment of the HTLV-III/LAV envelope produced in E. coli may be an important ingredient of a vaccine for acquired immune deficiency syndrome.