Baculovirus vectors recently have been shown to be capable of efficient transduction of human hepatoma cells and primary hepatocytes in culture. This paper describes the generation of a novel recombinant baculovirus (VGZ3) in which the vesicular stomatitis virus glycoprotein G (VSV G) is present in the viral envelope. The gene encoding VSV G was inserted into the baculovirus genome under the control of the polyhedrin promoter such that it was expressed at very high levels in infected insect cells but not in mammalian cells. Expression of the lacZ reporter gene was driven by a promoter that is functional in mammalian cells (the Rous sarcoma virus long terminal repeat). We show by Western analysis that VSV G protein was present in purified baculovirus preparations. A VSV G monoclonal antibody blocked transduction of mammalian cells by VGZ3. This virus was morphologically distinct from baculovirus lacking VSV G, with virions adopting an oval rather than rod-shaped morphology. VGZ3 transduced human hepatoma cells in vitro at an efficiency roughly 10-fold greater than baculovirus lacking VSV G (the virus Z4). VGZ3 was also capable of transducing cell lines that could not be transduced efficiently by Z4. We provide evidence that VSV G protein may enhance transduction by increasing the efficiency of escape of baculovirus from intracellular vesicles rather than by increasing cell binding or uptake of the virus. The possible use of this and related baculoviruses in gene therapy is discussed.