Myoblasts from skeletal muscle of chicken or Japanese quail embryos were infected with avian sarcoma virus 17 (ASV-17), a retrovirus carrying the jun oncogene. At high multiplicities of infection ASV-17-induced morphologic transformation inhibited fusion of myoblasts into myotubes and stimulated extended replication. The expression of the muscle-specific proteins desmin, myosin and creatine phosphokinase was inhibited in ASV-17-infected cultures. Immunofluorescent staining detected strong expression of the ASV-17 Gag-Jun fusion protein in the nuclei of infected mononuclear myoblasts, but Gag-Jun was not detectable in multinucleated myotubes that occurred in clonal populations of ASV-17-infected quail myoblasts. This result suggests that the nuclear expression of viral jun and myogenic differentiation are mutually exclusive events. A mutant of ASV-17, ts jun-1, is partly temperature-sensitive in its ability to transform chicken embryo fibroblasts. At the non-permissive temperature of 41.5 degrees C, multinucleated myotubes readily formed in ts jun-1-infected myoblast cultures and expressed muscle-specific proteins detectable by immunofluorescent staining. These myotubes also showed strong immunofluorescent staining for Gag-Jun in the cell nuclei. The nuclear expression of a Jun protein that is defective in its transforming function appears therefore to be compatible with myogenesis. Several retroviral constructs carrying various viral and cellular jun inserts, as well as jun deletion mutants and recombinants between c-jun and v-jun, were tested for their effect on myogenic differentiation. There was an approximate correlation between the ability of a construct to transform chicken embryo fibroblasts and its effectiveness in interfering with myogenic differentiation. We conclude that the expression of an oncogenic jun gene in myoblasts strongly inhibits myogenic differentiation, and that a highly transforming Jun protein cannot be expressed in the nuclei of differentiating myotubes, while the presence of transformation-defective variants of Jun is compatible with differentiation.