While several clinical studies have shown that HIV-1 infection is associated with increased permeability of the intestinal tract, there is very little understanding of the mechanisms underlying HIV-induced impairment of mucosal barriers. Here we demonstrate that exposure to HIV-1 can directly breach the integrity of mucosal epithelial barrier, allowing translocation of virus and bacteria. Purified primary epithelial cells (EC) isolated from female genital tract and T84 intestinal cell line were grown to form polarized, confluent monolayers and exposed to HIV-1. HIV-1 X4 and R5 tropic laboratory strains and clinical isolates were seen to reduce transepithelial resistance (TER), a measure of monolayer integrity, by 30-60% following exposure for 24 hours, without affecting viability of cells. The decrease in TER correlated with disruption of tight junction proteins (claudin 1, 2, 4, occludin and ZO-1) and increased permeability. Treatment of ECs with HIV envelope protein gp120, but not HIV tat, also resulted in impairment of barrier function. Neutralization of gp120 significantly abrogated the effect of HIV. No changes to the barrier function were observed when ECs were exposed to Env defective mutant of HIV. Significant upregulation of inflammatory cytokines, including TNF-alpha, were seen in both intestinal and genital epithelial cells following exposure to HIV-1. Neutralization of TNF-alpha reversed the reduction in TERs. The disruption in barrier functions was associated with viral and bacterial translocation across the epithelial monolayers. Collectively, our data shows that mucosal epithelial cells respond directly to envelope glycoprotein of HIV-1 by upregulating inflammatory cytokines that lead to impairment of barrier functions. The increased permeability could be responsible for small but significant crossing of mucosal epithelium by virus and bacteria present in the lumen of mucosa. This mechanism could be particularly relevant to mucosal transmission of HIV-1 as well as immune activation seen in HIV-1 infected individuals.