Several rare and novel NNRTI [non-nucleoside reverse transcriptase (RT) inhibitor] resistance mutations were recently detected at codons 132 and 135 in RTs from clinical isolates using the yeast-based chimaeric TyHRT (Ty1/HIV-1 RT) phenotypic assay. Ile132 and Ile135 form part of the beta7-beta8 loop of HIV-1 RT (residues 132-140). To elucidate the contribution of these residues in RT structure-function and drug resistance, we constructed twelve recombinant enzymes harbouring mutations at codons 132 and 135-140. Several of the mutant enzymes exhibited reduced DNA polymerase activities. Using the yeast two-hybrid assay for HIV-1 RT dimerization we show that in some instances this decrease in enzyme activity could be attributed to the mutations, in the context of the 51 kDa subunit of HIV-1 RT, disrupting the subunit-subunit interactions of the enzyme. Drug resistance analyses using purified RT, the TyHRT assay and antiviral assays demonstrated that the I132M mutation conferred high-level resistance (>10-fold) to nevirapine and delavirdine and low-level resistance (approximately 2-3-fold) to efavirenz. The I135A and I135M mutations also conferred low level NNRTI resistance (approximately 2-fold). Subunit selective mutagenesis studies again demonstrated that resistance was conferred via the p51 subunit of HIV-1 RT. Taken together, our results highlight a specific role of residues 132 and 135 in NNRTI resistance and a general role for residues in the beta7-beta8 loop in the stability of HIV-1 RT.