People living with HIV (PLWH) receiving HIV integrase strand transfer inhibitors (INSTIs) have been reported to experience virological failure (VF) in the absence of resistance mutations in integrase (IN). To elucidate INSTI resistance mechanisms and pathways, we performed long-term (1-2 years) passaging of lab-adapted and primary HIV-1 isolates in human T-cell lines and primary peripheral blood mononuclear cells with an escalating concentration of the INSTI dolutegravir (DTG). Independent of viral strain and cell type, HIV-1 acquired resistance to DTG through the sequential acquisition of mutations in Env and nucleocapsid (NC), with the occasional appearance of IN mutations. The Env mutations confer resistance to INSTIs by increasing the virus replication capacity through enhanced cell-cell transfer. In contrast, the NC mutations provide escape from INSTIs by accelerating the kinetics of viral DNA integration. The shortened time frame between the completion of reverse transcription and integration correlates with reduced sensitivity to DTG, suggesting that NC mutations limit the window of opportunity for INSTIs to bind intasomes and block integration. To assess the clinical relevance of results from our cell-culture selections, we analyzed samples from PLWH experiencing VF on a tenofovir-lamivudine-dolutegravir (TLD) regimen. Notably, plasma HIV RNA sequences from some individuals at VF showed NC mutations similar to those observed in vitro, with a subset also carrying IN mutations such as IN-R263K. Phenotypic analysis demonstrated that mutations in NC and IN act in concert to increase resistance to DTG. These results provide insights into the mechanism by which NC mutations reduce the susceptibility of HIV-1 to INSTIs and underscore the importance of genotypic analysis outside IN in individuals experiencing VF to INSTI-containing regimens.