A pathogenetic hallmark of retroviral neurodegeneration is the affinity of neurovirulent retroviruses for microglia cells, while degenerating neurons are excluded from retroviral infections. Microglia isolated ex vivo from rats peripherally infected with a neurovirulent retrovirus released abundant mature type C virions; however, infectivity associated with microglia was very low. In microglia, viral transcription was unaffected but envelope proteins were insufficiently cleaved into mature viral proteins and were not detected on the microglia cell surface. These microglia-specific defects in envelope protein translocation and processing not only may have prevented formation of infectious virus particles but also may have caused further cellular defects in microglia with the consequence of indirect neuronal damage. It is conceivable that similar events play a role in neuro-AIDS.