Proteolytic processing of foamy virus Gag proteins appears to be different from that of other retroviruses. A single carboxy-terminal cleavage site is consistently detectable in human foamy virus (HFV) Gag precursor protein p74Gag derived from infected cells and/or purified virus particles. Using a recombinant HFV protease, we have determined the p74Gag cleavage site that results in p70Gag and the carboxy-terminal p3Gag (Pfrepper et al., 1997, Biochem. Biophys. Res. Commun. 237, 548-553). To study the biological functions of p3Gag, proviral DNA clones were constructed coding for a carboxy-terminally truncated p70Gag lacking the entire p3Gag protein. Removal of p3Gag resulted in an about 100-fold lower virus titer. The expression of other HFV proteins and the processing of Pol proteins were indistinguishable from those of wild-type-transfected cells. The defect in viral infectivity of the p3 mutants was partially restored by coexpressing the full-length p74Gag protein in trans. The deletion of p3Gag resulted in particle assembly with wild-type virion morphology and encapsidation of Pol proteins. Our data show that the carboxy-terminal p3Gag protein has an important function for viral infectivity but is not required for preassembly of capsids, virus morphogenesis, and incorporation of Pol proteins into virions.