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Background. HIV-1 epidemic in Western Europe is largely due to subtype B. Little is known about the HIV-1 in Eastern Europe, but a few studies have shown that non-B subtypes are quite common. In Albania, where a recent study estimated a ten-fold increase of AIDS incidence during the last six years, subtype A and B account for 90% of the know infections. Methodology/Principal Findings. We investigated the demographic history of HIV-1 subtype A and B in Albania by using a statistical framework based on coalescent theory and phylogeography. High-resolution phylogenetic and molecular clock analysis showed a limited introduction to the Balkan country of subtype A during the late 1980s followed by an epidemic outburst in the early 1990s. In contrast, subtype B was apparently introduced multiple times between the mid-1970s and mid-1980s. Both subtypes are growing exponentially, although the HIV-1A epidemic displays a faster growth rate, and a significantly higher basic reproductive number R0. HIV-1A gene flow occurs primarily from the capital Tirane, in the center of the country, to the periphery, while HIV-1B flow is characterized by a balanced exchange between center and periphery. Finally, we calculated that the actual number of infections in Albania is at least two orders of magnitude higher than previously thought. Conclusions/Significance. Our analysis demonstrates the power of recently developed computational tools to investigate molecular epidemiology of pathogens, and emphasize the complex factors involved in the establishment of HIV-1 epidemics. We suggest that a significant correlation exists between HIV-1 exponential spread and the socio-political changes occurred during the Balkan wars. The fast growth of a relatively new non-B epidemic in the Balkans may have significant consequences for the evolution of HIV-1 epidemiology in neighboring countries in Eastern and Western Europe. [ABSTRACT FROM AUTHOR]