HIV-1 Env mediates virus attachment to and fusion with target cell membranes, and yet, while Env is still situated at the plasma membrane of the producer cell and before its incorporation into newly formed particles, Env already interacts with the viral receptor CD4 on target cells, thus enabling the formation of transient cell contacts that facilitate the transmission of viral particles. During this first encounter with the receptor, Env must not induce membrane fusion, as this would prevent the producer cell and the target cell from separating upon virus transmission, but how Env's fusion activity is controlled remains unclear. To gain a better understanding of the Env regulation that precedes viral transmission, we examined the nanoscale organization of Env at the surface of producer cells. Utilizing superresolution microscopy (stochastic optical reconstruction microscopy [STORM]) and fluorescence recovery after photobleaching (FRAP), we quantitatively assessed the clustering and dynamics of Env upon its arrival at the plasma membrane. We found that Gag assembly induced the aggregation of small Env clusters into larger domains and that these domains were completely immobile. Truncation of the cytoplasmic tail (CT) of Env abrogated Gag's ability to induce Env clustering and restored Env mobility at assembly sites, both of which correlated with increased Env-induced fusion of infected and uninfected cells. Hence, while Env trapping by Gag secures Env incorporation into viral particles, Env clustering and its sequestration at assembly sites likely also leads to the repression of its fusion function, and thus, by preventing the formation of syncytia, Gag helps to secure efficient transfer of viral particles to target cells.