Of the various genetic subtypes of HIV-1, HIV-2 and SIV, only in subtype C of HIV-1, a genetically variant NF-κB binding site is found at the core of the viral promoter in association with a subtype-specific Sp1III motif. How the subtype-associated variations in the core transcription factor binding sites (TFBS) influence gene expression from the viral promoter has not been examined previously. Using panels of infectious viral molecular clones, we demonstrate that subtype-specific NF-κB and Sp1III motifs have evolved for optimal gene expression, and neither of the motifs can be substituted by a corresponding TFBS variant.The variant NF-κB motif binds NF-κB with an affinity two-fold higher than that of the generic NF-κB site. Importantly, in the context of an infectious virus, the subtype-specific Sp1III motif demonstrates a profound loss of function in association with the generic NF-κB motif. An additional substitution of the Sp1III motif fully restores viral replication suggesting that the subtype C specific Sp1III has evolved to function with the variant, but not generic, NF-κB motif. A change of only two base pairs in the central NF-κB motif completely suppresses viral transcription from the provirus and converts the promoter into heterochromatin refractory to TNF-α induction. The present work represents the first demonstration of functional incompatibility between an otherwise functional NF-κB motif and a unique Sp1 site in the context of HIV-1 promoter. Our work provides important leads as per the evolution of HIV-1 subtype C viral promoter with relevance for gene expression regulation and viral latency.