Endogenous retroviruses constitute a significant genomic fraction in all mammalian species. Typically they are evolutionarily old and fixed in the host species population. Here we report on a novel endogenous gammaretrovirus (CrERVγ; for cervid endogenous gammaretrovirus) in the mule deer (Odocoileus hemionus) that is insertionally polymorphic among individuals from the same geographical location, suggesting that it has a more recent evolutionary origin. Using PCR-based methods, we identified seven CrERVγ proviruses and demonstrated that they show various levels of insertional polymorphism in mule deer individuals. One CrERVγ provirus was detected in all mule deer sampled but was absent from white-tailed deer, indicating that this virus originally integrated after the split of the two species, which occurred approximately one million years ago. There are, on average, 100 CrERVγ copies in the mule deer genome based on quantitative PCR analysis. A CrERVγ provirus was sequenced and contained intact open reading frames (ORFs) for three virus genes. Transcripts were identified covering the entire provirus. CrERVγ forms a distinct branch of the gammaretrovirus phylogeny, with the closest relatives of CrERVγ being endogenous gammaretroviruses from sheep and pig. We demonstrated that white-tailed deer (Odocoileus virginianus) and elk (Cervus canadensis) DNA contain proviruses that are closely related to mule deer CrERVγ in a conserved region of pol; more distantly related sequences can be identified in the genome of another member of the Cervidae, the muntjac (Muntiacus muntjak). The discovery of a novel transcriptionally active and insertionally polymorphic retrovirus in mammals could provide a useful model system to study the dynamic interaction between the host genome and an invading retrovirus.