Guangxi Province, China recently experienced an outbreak of HIV-1 infection among heroin users. We studied HIV-1 incidence rates and associated risk factors for HIV-1 infection among heroin users residing in Pingxiang City. A total of 318 heroin users were followed from February 1998 through January 1999 (median follow-up: 8.1 months). Of these, 130 were prospectively followed from January through September 1999 (median follow-up: 8.3 months). HIV-1 and hepatitis C virus (HCV) incidence rates for each period were calculated. A generalized estimating equation approach was implemented to identify independent risk factors associated with HIV-1 infection across both periods. Among 318 study participants, 97.2% were men. The median age was 22 years. Approximately 60% reported sharing needles. HIV-1 prevalence at baseline was 15.4%. During the first follow-up period, HIV-1 incidence was 2.38 per 100 person years (py), and HCV incidence was 26.8 per 100 py. During the second follow-up period, HIV-1 incidence was 6.86 per 100 py, and HCV incidence was 28.9 per 100 py. After controlling for age and other factors, HCV seropositivity, history of sexually transmitted diseases, and sharing needles were independently associated with HIV-1 infection. These data suggest that HIV-1 incidence was rising over time in Pingxiang City, Guangxi Province. The high incidence of HCV heightens the importance of enhanced prevention programs to reduce injection and needle sharing among heroin users.