We have utilized a mouse mammary tumor virus (MMTV) glycoprotein gene containing a mutation in the endoproteolytic cleavage site to investigate the biological significance of processing, the structural requirements for and the events involved in the proteolytic maturation of MMTV. Using oligonucleotide-directed mutagenesis, the endoproteolytic cleavage site within the MMTV glycoprotein was mutated from Arg-Ala-Lys-Arg to Arg-Ala-Asn-Gln and both the wild-type and mutated genes were transfected and expressed in HTC rat hepatoma cells. Indirect immunofluorescence, steady state radiolabeling and pulse-chase kinetic experiments demonstrated that this mutated glycoprotein was transported to the cell surface with the same efficiency as the wild-type maturation products; however, proteolytic cleavage and fusogenic activity were almost completely abolished. Consistent with the lack of cleavage, the endoglycosidase H-resistant precursor, gp78, accumulated on the cell surface and in the extracellular environment. When HTC cells expressing the wild-type MMTV glycoprotein were treated with the Golgi mannosidase I and II inhibitors, deoxymannojirimycin and swainsonine respectively, the resulting endogycosidase H-sensitive glycoproteins were processed efficiently. Taken together, these results suggest that proteolytic processing of the MMTV glycoprotein most likely occurs in the trans Golgi or at a later step in the exocytic pathway and occurs after the formation of an endoglycosidase H-resistant, terminally sialylated intermediate. Moreover, the acquisition of endoglycosidase H-resistant oligosaccharides is not a prerequisite for recognition by the cellular proteases to generate the viral maturation products. Our evidence also suggests that the processing of the MMTV envelope glycoprotein is required for the functional exposure of the fusion domain which is involved in viral infectivity.