Membrane-associated RING-CH (MARCH) 2 is a member of the MARCH protein family of RING-CH finger E3 ubiquitin ligases that play important roles in regulating the levels of proteins found on the cell surface. MARCH1, 2 and 8 inhibit HIV-1 infection by preventing the incorporation of the envelope glycoproteins into nascent virions. However, a better understanding of the mechanism utilized by MARCH proteins to restrict HIV-1 infection is needed. In this report, we identify an amino acid in human MARCH2, absent in mouse MARCH2, critical for its antiretroviral function. Moreover, we map the domains of human MARCH2 critical for restricting as well as binding to the HIV-1 envelope glycoproteins. In addition, we demonstrate that MARCH2 is present inside nascent virions and reduces particle infectivity by blocking virus entry in a RING-CH-independent manner. Finally, we show that MARCH2 acts as an HIV-1 restriction factor only in primary CD4+ T cells and can prevent cell-to-cell transmission of HIV-1. Our findings reveal important new aspects of the antiviral mechanism utilized by human MARCH2 to restrict HIV-1 that have potential implications to all MARCH proteins with antiviral functions and their viral targets.