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The specificity of human immunodeficiency virus type 1 (HIV-1) for human cells precludes virus infection in most mammalian species and limits the utility of small animal models for studies of disease pathogenesis, therapy, and vaccine development. One way to overcome this limitation is by human cell xenotransplantation in immune-deficient mice. However, this has proved inadequate, as engraftment of human immune cells is limited (both functionally and quantitatively) following transplantation of mature human lymphocytes or fetal thymus/liver. To this end, a human immune system was generated from umbilical cord blood-derived CD34+ hematopoietic stem cells in BALB/c-Rag2-/- γc-/- mice. Intrapartum busulfan administration followed by irradiation of newborn pups resulted in uniform engraftment characterized by human T-cell development in thymus, B-cell maturation in bone marrow, lymph node development, immunoglobulin M (IgM)/IgG production, and humoral immune responses following ActHIB vaccination. Infection of reconstituted mice by CCR5- coreceptor utilizing HIV-1ADA and subtype C 1157 viral strains elicited productive viral replication and lymphadenopathy in a dose-dependent fashion. We conclude that humanized BALB/c-Rag2 sup>-/- γc-/- mice represent a unique and valuable resource for HIV-1 pathobiology studies.