Mutations selected in reoviruses isolated from persistently infected cultures (PI viruses) affect viral entry into cells. Unlike wild-type (wt) viruses, PI viruses can grow in the presence of ammonium chloride, a weak base that blocks acid-dependent proteolysis of viral outer-capsid proteins in cellular endosomes during viral entry. In this study, we show that E64, an inhibitor of cysteine proteases such as those present in the endocytic compartment, blocks growth of wt reovirus by inhibiting viral disassembly. To determine whether PI viruses can grow in the presence of an inhibitor of endocytic proteases, we compared yields of wt and PI viruses in cells treated with E64. Prototype PI viruses L/C, PI 2A1, and PI 3-1 produced substantially greater yields than wt viruses type 1 Lang (T1L) and type 3 Dearing (T3D) in E64-treated cells. To identify viral genes that segregate with growth of PI viruses in the presence of E64, we tested reassortant viruses isolated from independent crosses of T1L and each of the prototype PI viruses for growth in cells treated with E64. Growth of reassortant viruses in the presence of E64 segregated exclusively with the S4 gene, which encodes viral outer-capsid protein sigma3. These results suggest that mutations in sigma3 protein selected during persistent infection alter its susceptibility to cleavage during viral disassembly. To determine the temporal relationship of acid-dependent and protease-dependent steps in reovirus disassembly, cells were infected with wt strain T1L or T3D, and medium containing either ammonium chloride or E64d, a membrane-permeable form of E64, was added at various times after adsorption. Susceptibility to inhibition by both ammonium chloride and E64 was abolished when either inhibitor was added at times greater than 60 min after adsorption. These findings indicate that acid-dependent and protease-dependent disassembly events occur with similar kinetics early in reovirus replication, which suggests that these events take place within the same compartment of the endocytic pathway.