The neuroinvasiveness of a chimeric murine retrovirus, CasFr KP (KP), is dependent on the expression of glycosylated Gag (gp85 gag). This viral protein is the product of alternate translation initiation 88 codons upstream of and in frame with the initiation codon of pr65 gag , the precursor of the viral core proteins. Although expression of glycosylated Gag affects virus spread in the spleen, it appears not to affect virus spread in vitro in fibroblast cell lines (J. L. Portis et al., J. Virol. 68:3879-3887, 1994). The differential effects of this protein in vitro and in vivo have not been explained, and its function is unknown. We have here compared the in vitro processing of this molecule with that expressed in spleens of infected mice. In vitro, gp85 gag was cleaved near the middle of the molecule, releasing the C-terminal half (containing capsid and nucleocapsid domains of pr65 gag) as a secreted glycoprotein. The N-terminal half of the protein was associated with the plasma membrane as a ϳ55-kDa glycoprotein bearing the matrix domain of pr65 gag as well as the N-terminal 88 residue L domain. This processing scheme was also observed in vivo, although two differences were seen. There were differences in N-linked glycosylation of the secreted form of the protein expressed in the spleen. In addition, whereas the membrane-associated species assumed the orientation of a type II integral membrane protein (N cyto C exo) in fibroblasts in vitro, a subpopulation of spleen cells was detected in which the N terminus of the protein was exposed at the cell surface. These results suggest that the differential effects of glycosylated Gag expression in vivo and in vitro may be related to differences in posttranslational processing of the protein.