The drug is a testosterone-laden ointment called LibiGel and it's intended to boost the libido of women who have lost interest in sex.
It will be prescribed at UVa in coming months to women who are suffering from hypoactive sexual desire disorder.
The condition is believed to affect one-third of American women.
"It is the most common sexual problem that women have," said Dr. Anita Clayton, a psychiatrist with the UVa Health System and author of the 2007 book "Satisfaction: Women, Sex and the Quest for Intimacy."
UVa joins 99 other medical institutions participating in testing the drug's efficacy and safety.
If given the green light by the U.S. Food and Drug Administration, Illinois-based BioSante Pharmaceuticals Inc. hopes to offer the drug to any woman complaining of a low sex drive.
For now, though, Clayton will enroll 25 women between the ages of 30 and 65 to take part in the national study.
Those women must have had both ovaries surgically removed, be currently taking an estrogen supplement and be distressed about their lack of libido.
Ovariectomies, or surgical menopause, can lead to a drop in sexual interest because ovaries produce roughly half of the testosterone in a woman's body.
Testosterone plays a key role in sexual functioning for men and women.
LibiGel comes in a pump bottle. The woman rubs the small dot of gel into the skin of her upper arm. Over the next 24 hours, the gel's testosterone seeps into her bloodstream, boosting her energy and libido.
Clayton, who is running the clinical trial at UVa, said the drug is better than previous testosterone treatments because it keeps levels of the chemical constant, much like naturally occurring testosterone.
"I expect this will work," she said.
In its second-phase clinical trials at 17 institutions, LibiGel led to a 283 percent increase of satisfying sexual encounters for the women taking the drug.
"A lot of women have this problem, but unfortunately they've been largely ignored by pharmaceutical companies," said BioSante's chief executive, Stephen M. Simes. "It's not fair that women have no drugs, while men have many."