Rous sarcoma virus (RSV), a member of the avian sarcoma and leukosis family of retroviruses, has long been known to be capable of infecting and transforming mammalian cells; however, such transformed cells do not release virus particles. The RSV gag product (Pr76gag) produced in these cells is not released into the culture medium or proteolytically processed to release mature products. Thus, the behavior of Pr76gag in mammalian cells is much like that of mammalian retroviral Gag proteins which have been altered so as to block the addition of myristic acid at residue 2 (Gly). Because the RSV gag product does not possess a myristic acid addition site, we hypothesized that the creation of one by oligonucleotide-directed mutagenesis might permit particles to be released from mammalian cells. Two myristylated forms of Pr76 were created. In Pr76myr1, the first 10 amino acids have been exchanged for those of p60v-src, which are known to be sufficient for myristylation. In Pr76myr2, the Glu at the second residue has been substituted with Gly. The alleles encoding the modified and wild-type forms of Pr76 have been expressed at high levels in mammalian (CV-1) cells by using an SV40-based vector. Surprisingly, we have found that expression of high levels of the unmodified (wild-type) product, Pr76myr0, results in low levels of particle formation and precursor processing. This indicates that myristic acid is not the sole determinant for targeting. However, the addition of myristic acid to Pr76myr1 or Pr76myr2 resulted in a fivefold enhancement in Gag function. In all aspects examined, the behavior of myristylated Pr76 was identical to that of the authentic product produced in avian cells. We also show that processing is mediated by the gag-encoded protease and that removal of the amino terminus to create Pr76gagX results in an inability to form particles or be processed. This suggests that proper targeting is prerequisite for activation of the RSV protease in mammalian cells.