In avian cells, the product of the gag gene of Rous sarcoma virus, Pr76gag, has been shown to be targeted to the plasma membrane, to form virus particles, and then to be processed into mature viral gag proteins. To explore how these phenomena may be dependent upon cellular (host) factors, we expressed the Rous sarcoma virus gag gene in a lower eucaryote, Saccharomyces cerevisiae, and studied the behavior of the gag gene product. We show here that Pr76gag is processed in yeast cells and that this processing is specific, since it is abolished in a mutant in which the active site of the gag protease has been destroyed. In this mutant, the uncleaved precursor is found associated with the yeast plasma membrane, yet no virus particles were detected in cells or in the culture medium. From our results, we can speculate either that in yeast cells, a host protease initiates Pr76gag processing in the cytosol or that in avian cells, an inhibitor prevents the processing until the viral particle is formed.