Display omitted •HIV-1 Gag protein adopts a compact (C-Gag) form in cells.•C-Gag formation requires both MA and NC RNA-binding domains.•C-Gag is stabilized by an intramolecular interaction between MA and CA domains.•Mutation altering C-Gag formation reduce infectious pseudoparticles production and infectivity. HIV-1 Gag polyprotein plays a pivotal role in assembly and budding of new particles, by specifically packaging two copies of viral gRNA in the host cell cytoplasm and selecting the cell plasma membrane for budding. Both gRNA and membrane selections are thought to be mediated by the compact form of Gag. This compact form binds to gRNA through both its matrix (MA) and nucleocapsid (NC) domains in the cytoplasm. At the plasma membrane, the membrane competes with gRNA for Gag binding, resulting in a transition to the extended form of Gag found in immature particles with MA bound to membrane lipids and NC to gRNA. The Gag compact form was previously evidenced in vitro. Here, we demonstrated the compact form of Gag in cells by confocal microscopy, using a bimolecular fluorescence complementation approach with a split-GFP bipartite system. Using wild-type Gag and Gag mutants, we showed that the compact form is highly dependent on the binding of MA and NC domains to RNA, as well as on interactions between MA and CA domains. In contrast, Gag multimerization appears to be less critical for the accumulation of the compact form. Finally, mutations altering the formation of Gag compact form led to a strong reduction in viral particle production and infectivity, revealing its key role in the production of infectious viral particles.