An iterative computer-assisted drug design (CADD) method that combines molecular mechanics, dynamics, thermodynamic cycle perturbation (TCP) calculations, molecular design, synthesis, and biochemical testing of peptidomimetic inhibitors and crystallographic structure determination of the protein-inhibitor complexes has been successfully applied to the design of novel inhibitors for the HIV1 protease. The first "designer" compound in this series (I) was designed by replacing the C-terminal Val-Val methyl ester of a known hydroxyethylene inhibitor with a diphenhydramine amide derivative in which two phenyl groups fill the p2' and p3' side-chain binding pockets in the HIV1 protease. Subsequent testing showed modest inhibition (Ki = 1.67 microM). Concurrently, molecular mechanics calculations on designed analogs indicated the feasibility of replacement of a phenyl ring with an indole ring (II). Synthesis and biochemical testing resulted in better inhibition potency for II. X-ray crystal structure determination of HIV1 protease complexed with I and II provided structural information for subsequent design and TCP calculations. A TCP protocol was established and validated for the mutation of I-->II. TCP results showed a net gain of 2.1 (+/- 0.9) kcal/mol in replacing II with I, which agreed with experimental result within an error margin of 0.8 kcal/mol. TCP calculations for six other mutations (I-->III, II-->III, IV, V, VI, and VII) were performed prior to synthesis and testing. These results allowed for the prioritization of design ideas for synthesis. In all cases where experimental results are available, TCP calculations showed good agreement. These results demonstrate that the TCP approach can be used with medicinal chemistry and crystallography for screening the proposed derivatives of a lead compound prior to synthesis, thus potentially reducing the time for the discovery of new drugs.