HIV infection can result in depletion of total CD4⁺ T cells and naive CD8⁺ T cells, and in the generation of dysfunctional effector CD8⁺ T cells. In this study, we show that naive CD8⁺ T cells in subjects with progressive HIV disease express low levels of CD8α and CD8β chains. Such naive CD8^low T cells display broad signaling defects across the T-cell receptor complex, and their appearance correlates with generalized up-regulation of major histocompatibility complex class I (MHC-I) antigens on peripheral blood mononuclear cells (PBMCs). To explore a causal link between increased MHC-I up-regulation and the generation of naive CD8^low T cells, we used the humanized SCID-hu Thy/Liv mouse model to show that HIV infection of the thymus and interferon α (IFNα) treatment alone result in MHC-I up-regulation and in the generation of dysfunctional CD3^highCD8⁺CD4⁻ single-positive 8 (SP8) thymocytes with low expression of CD8. We suggest that dysfunctional naive CD8^low T cells are generated as a result of IFNα-mediated up-regulation of MHC-I on stromal cells in the thymus and antigen-presenting cells in the periphery, and that dysfunction in this naive compartment contributes to the immunodeficiency of HIV disease. This study is registered at www.clinicaltrials.gov as NCT00187512.