Short-course antiretroviral drug regimens reduce the risk of mother-to-child transmission of HIV-1, but mechanisms affording protection of such interventions remain poorly defined. Because T-cell activation is an important factor in productive HIV-1 infection, we tested the hypothesis that single-dose nevirapine (NVP) reduces immune activation, which in turn reduces the likelihood of transmission. We compared concentrations of cord and maternal blood plasma immune activation markers, neopterin, β2-microglobulin, and soluble l-selectin, in 2 groups of HIV-1-exposed newborns whose mothers either received NVP at the onset of labor or who only received NVP as postexposure prophylaxis within 72 hours of birth and among HIV-unexposed controls. In utero exposure of the infant to HIV-1, regardless of NVP exposure, led to demonstrable increases in immune activation markers, this being most notable in the presence of preexisting infection. Contrary to what was hypothesized, immune activation was increased by prebirth exposure to single-dose NVP, with this effect being enhanced in infants already infected at birth. Our data suggest that reductions in immune activation do not explain transmission prevention effects of single-dose NVP. Our data also suggest a biological explanation for why HIV-1-infected infants exposed perinatally to antiretroviral drugs might experience hastened disease progression, namely, in some HIV-1-infected individuals, NVP may synergize with HIV-1 to enhance an environment that favors increased HIV-1 replication.