In a prospective cross-sectional study we quantified HIV viral load within the alveolar macrophage in a cohort of healthy HIV-infected subjects who did not have medical comorbidities or smoke cigarettes to determine if alveolar macrophage proviral DNA was associated with alveolar macrophage phagocytic immune dysfunction. We enrolled 23 subjects who underwent bronchoscopy and bronchoalveolar lavage. Alveolar macrophages were isolated and HIV-1 RNA was quantified in the cells using the Abbott RealTime HIV-1 Assay. Proviral DNA was qualitatively measured using a modified version of the HIV-1 RNA assay. Phagocytosis measured by incubating alveolar macrophages with FITC-labeled Staphylococcus aureus and determining fluorescence with a Zeiss inverted microscope. Phagocytic index was calculated as (% positive cells × mean channel fluorescence)/100. Sixteen subjects had (+) proviral DNA and seven had (-) proviral DNA in their alveolar macrophages. Of all subjects 100% in both groups were on highly active antiretroviral therapy (HAART). The median plasma viral load was 0 in both groups. HIV-1-infected subjects with (+) proviral DNA in their alveolar macrophages had a significantly lower median alveolar macrophage phagocytic index compared to those with (-) proviral DNA in their alveolar macrophages [11.8 (IQR 4.8-39.0) vs. 64.9 (IQR 14.0-166.0), p = 0.05]. Alveolar macrophages harbor HIV even in otherwise healthy subjects with undetectable plasma viral loads, representing a potential reservoir for the virus. In addition, HIV viral replication within the macrophage may impair phagocytosis and other immune functions in the lung, leading to an increased risk for lung infection.