CD4(+) T cell depletion and immune activation are hallmarks of HIV infection. Despite extensive studies, the mechanisms underlying immune modulation remain elusive. HIV-1 Nef protein is secreted in exosomes from infected cells and is abundant in the plasma of HIV+ individuals. Exosomal Nef (exNef) was also shown to induce apoptosis in bystander CD4(+) T cells. We hypothesized that exNef contributes to HIV pathogenesis. A HIV-1 NL4-3 virus containing alanine substitutions in the secretion modification region (SMR; amino acids 66 to 70; HIVNefsmr5a) was developed. Nef protein containing this modified SMR was shown to be deficient in exNef secretion in nef-transfected cells. Using both HIV-1 NL4-3 wild type (HIVwt) and HIVNefsmr5a, correlates of pathogenesis were evaluated in cell-lines, human peripheral blood mononuclear cells, and humanized NOD-RAG1(-/-) IL2r(-/-) double mutant (NRG) mice. Disruption of the SMR did not affect viral replication or exNef secretion from infected cell cultures as compared with nef-transfected cells. However, T cell apoptosis was reduced in HIVNefsmr5a infected cell cultures and CD4(+) T cell depletion was reduced in the spleen and peripheral blood of similarly infected NRG mice. Inflammatory cytokine release was also decreased in the sera of HIVNefsmr5a infected mice relative to HIVwt infected controls. These findings demonstrate the importance of Nef and the SMR motif in HIV pathogenesis and suggest a potential role for exNef in HIV-driven immune modulation.