Single-molecule spectroscopy was used to examine how a model inhibitor of HIV-1, argininamide, modulates the nucleic acid chaperone activity of the nucleocapsid protein (NC) in the minus-strand transfer step of HIV-1 reverse transcription, in vitro. In minus-strand transfer, the transactivation response region (TAR) RNA of the genome is annealed to the complementary "TAR DNA" generated during minus-strand strong-stop DNA synthesis. Argininamide and its analogs are known to bind to the hairpin bulge region of TAR RNA as well as to various DNA loop structures, but its ability to inhibit the strand transfer process has only been implied. Here, we explore how argininamide modulates the annealing kinetics and secondary structure of TAR DNA. The studies reveal that the argininamide inhibitory mechanism involves a shift of the secondary structure of TAR, away from the NC-induced "Y" form, an intermediate in reverse transcription, and toward the free closed or "C" form. In addition, more potent inhibition of the loop-mediated annealing pathway than stem-mediated annealing is observed. Taken together, these data suggest a molecular mechanism wherein argininamide inhibits NC-facilitated TAR RNA/DNA annealing in vitro by interfering with the formation of key annealing intermediates.