Despite the efficient suppression of HIV-1 replication that can be achieved with combined antiretroviral therapy (cART), low levels of type I interferon (IFN-I) signaling persist in some individuals. This sustained signaling may impede immune recovery and foster viral persistence. Here we report studies using a monoclonal antibody to block IFN-alpha/beta receptor (IFNAR) signaling in humanized mice (hu-mice) that were persistently infected with HIV-1. We discovered that effective cART restored the number of human immune cells in HIV-1-infected hu-mice but did not rescue their immune hyperactivation and dysfunction. IFNAR blockade fully reversed HIV-1-induced immune hyperactivation and rescued anti-HIV-1 immune responses in T cells from HIV-1-infected hu-mice. Finally, we found that IFNAR blockade in the presence of cART reduced the size of HIV-1 reservoirs in lymphoid tissues and delayed HIV-1 rebound after cART cessation in the HIV-1-infected hu-mice. We conclude that low levels of IFN-I signaling contribute to HIV-1-associated immune dysfunction and foster HIV-1 persistence in cART-treated hosts. Our results suggest that blocking IFNAR may provide a potential strategy to enhance immune recovery and reduce HIV-1 reservoirs in individuals with sustained elevations in IFN-I signaling during suppressive cART.