The possibility of transmission of caprine arthritis-encephalitis virus between lactating goats by the transfer of infected cells during milking has been examined experimentally. Four virus-free Saanen goats were infected, two in full lactation and two during the drying off period, by instillation of infected allogeneic cells into the milk canal of one-half of the udder. All four goats became infected, as shown by the isolation of virus from peripheral blood monocytes, seroconversion, and presence of typical lesions in the mammary gland. The virus was rapidly and constantly demonstrable in cells from the mammary secretions of the dry goats, but less regularly detected from milk cells from the lactating goats. Virus was more frequently isolated when milk SCC were elevated. Virus was present as often in secretions from the uninoculated half of the udder as the inoculated half. Dry goats seroconverted progressively, although antibody concentrations remained low; the lactating goats developed weak, positive Western blots in the late phase of lactation but only gave positive ELISA titers after drying off and artificial reinduction of lactation. At necropsy, lesions typical of the virus were observed in the mammary tissues of all four goats, and three had arthritis of the carpi.