Type I interferons (IFN-Is) play a dual role in the immune response to HIV-1, providing early antiviral defense while driving immune dysfunction in the chronic phase. During acute infection, robust IFN signaling is critical in controlling viral replication, activating innate immunity, and limiting reservoir establishment. However, sustained IFN-I activation during chronic infection fuels systemic inflammation, immune exhaustion, and fibrosis, particularly in lymphoid tissues such as gut-associated lymphoid tissue (GALT). Prolonged IFN-I exposure upregulates inhibitory receptors on T cells, impairs metabolic fitness, and fosters an immunosuppressive cytokine milieu that weakens overall immune responses. In contrast to natural SIV (Simian immunodeficiency virus) hosts, IFN-I responses are tightly regulated to prevent chronic immune activation and tissue damage. However, humans and non-natural hosts experience persistent Interferon Stimulated Gene (ISG) expression and IFN-I driven inflammation. Emerging therapeutic strategies seek to harness the antiviral benefits of IFN-I while mitigating its pathogenic effects. Approaches such as the IFNAR blockade, autophagy induction, JAK-STAT inhibition, and combined immune inhibitory blockade therapy show promise in restoring immune balance and enhancing T cell function. This review examines the mechanisms of IFN-I dysregulation in chronic HIV-1 infection and highlights novel interventions aimed at finetuning IFN-I signaling for therapeutic benefit.