Accurate classification of HIV-1 subtypes is essential for studying the dynamic spatial distribution pattern of HIV-1 subtypes and also for developing effective methods of treatment that can be targeted to attack specific subtypes. We propose a classification method based on profile Hidden Markov Model that can accurately identify an unknown strain. We show that a standard method that relies on the construction of a positive training set only, to capture unique features associated with a particular subtype, can accurately classify sequences belonging to all subtypes except B and D. We point out the drawbacks of the standard method; namely, an arbitrary choice of threshold to distinguish between true positives and true negatives, and the inability to discriminate between closely related subtypes. We then propose an improved classification method based on construction of a positive as well as a negative training set to improve discriminating ability between closely related subtypes like B and D. Finally, we show how the improved method can be used to accurately determine the subtype composition of Common Recombinant Forms of the virus that are made up of two or more subtypes. Our method provides a simple and highly accurate alternative to other classification methods and will be useful in accurately annotating newly sequenced HIV-1 strains