Retroviral particles assemble a few thousand units of the Gag polyproteins. Proteolytic cleavage mediated by the retroviral protease forms the bioactive retroviral protein subunits before cell entry. We hypothesized that this process could be exploited for targeted, transient, and dose-controlled transduction of nonretroviral proteins into cultured cells. We demonstrate that gammaretroviral particles tolerate the incorporation of foreign protein at several positions of their Gag or Gag-Pol precursors. Receptor-mediated and thus potentially cell-specific uptake of engineered particles occurred within minutes after cell contact. Dose and kinetics of nonretroviral protein delivery were dependent upon the location within the polyprotein precursor. Proteins containing nuclear localization signals were incorporated into retroviral particles, and the proteins of interest were released from the precursor by the retroviral protease, recognizing engineered target sites. In contrast to integration-defective lentiviral vectors, protein transduction by retroviral polyprotein precursors was completely transient, as protein transducing retrovirus-like particles could be produced that did not transduce genes into target cells. Alternatively, bifunctional protein-delivering particle preparations were generated that maintained their ability to serve as vectors for retroviral transgenes. We show the potential of this approach for targeted genome engineering of induced pluripotent stem cells by delivering the site-specific DNA recombinase, Flp. Protein transduction of Flp after proteolytic release from the matrix position of Gag allowed excision of a lentivirally transduced cassette that concomitantly expresses the canonical reprogramming transcription factors (Oct4, Klf4, Sox2, c-Myc) and a fluorescent marker gene, thus generating induced pluripotent stem cells that are free of lentivirally transduced reprogramming genes.