Retroviruses have played profound roles in our understanding of the genetic and molecular basis of cancer. Jaagsiekte sheep retrovirus (JSRV) is a simple retrovirus that causes contagious lung tumors in sheep, known as ovine pulmonary adenocarcinoma (OPA). Intriguingly, OPA resembles pulmonary adenocarcinoma in humans, and may provide a model for this frequent human cancer. Distinct from the classical mechanisms of retroviral oncogenesis by insertional activation of or virus capture of host oncogenes, the native envelope (Env) structural protein of JSRV is itself the active oncogene. A major pathway for Env transformation involves interaction of the Env cytoplasmic tail with as yet unidentified cellular adaptor(s), leading to the activation of PI3K/Akt and MAPK signaling cascades. Another potential mechanism involves the cell-entry receptor for JSRV, Hyaluronidase 2 (Hyal2), and the RON receptor tyrosine kinase, but the exact roles of these proteins in JSRV Env transformation remain to be better understood. Recently, a mouse model of lung cancer induced by JSRV Env has been developed, and the tumors in mice resemble those seen in sheep infected with JSRV and in humans. In this review, we summarize recent progress in our understanding the molecular mechanisms of oncogenic transformation by JSRV Env protein, and discuss the relevance to human lung cancer.