Female children and adults typically generate more efficacious immune responses to vaccines and infections than age-matched males, but also suffer greater immunopathology and autoimmune disease. We here describe, in a cohort of > 170 in utero HIV-infected infants from KwaZulu-Natal, South Africa, fetal immune sex differences resulting in a 1.5-2-fold increased female susceptibility to intrauterine HIV infection. Viruses transmitted to females have lower replicative capacity (p = 0.0005) and are more type I interferon-resistant (p = 0.007) than those transmitted to males. Cord blood cells from females of HIV-uninfected sex-discordant twins are more activated (p = 0.01) and more susceptible to HIV infection in vitro (p = 0.03). Sex differences in outcome include superior maintenance of aviraemia among males (p = 0.007) that is not explained by differential antiretroviral therapy adherence. These data demonstrate sex-specific innate immune selection of HIV associated with increased female susceptibility to in utero infection and enhanced functional cure potential among infected males.