Endogenous retroviruses (ERVs) are the remnants of ancient retroviral infections of germ cells and have been maintained in whole or part as heritable genomic elements. The last known endogenization events occurred several million years ago, and therefore stepwise analysis of retroviral endogenization has not been possible. A unique opportunity to study this process became available when a full-length ERV isolated from koalas (KoRV) was shown to have integrated into their germ line within the past 100 years. Even though KoRV shares 78% nucleotide identity with the exogenous and highly infectious gibbon ape leukemia virus (GALV), the infectivity of KoRV, like that of other ERVs, is substantially lower than that of GALV. Differences in the protein coding regions of KoRV that distinguish it from GALV were introduced into the GALV genome, and their functional consequences were assessed. We identified a KoRV gagpol L domain mutation as well as five residues present in the KoRV envelope (env) that, when substituted for the corresponding residues of GALV, resulted in vectors exhibiting substantially reduced titers similar to those observed with KoRV vectors. In addition, KoRV env protein lacks an intact CETTG motif that we have identified as invariant among highly infectious gammaretroviruses. Disruption of this motif in GALV results in vectors with reduced syncytia forming capabilities. Functional assessment of specific sequences that contribute to KoRV's attenuation from a highly infectious GALV-like progenitor virus has allowed the identification of specific modifications in the KoRV genome that correlate with its endogenization.