Endogenous retroviruses (ERVs) are the remnants of ancient retroviral infections of germ cells and have been maintained in whole or part as heritable genomic elements. The last known endogenization events occurred several million years ago, and therefore stepwise analysis of retroviral endogenization has not been possible. A unique opportunity to study this process became available when a full-length ERV isolated from koalas (KoRV) was shown to have integrated into their germ line within the past 100 years. Even though KoRV shares 78% nucleotide identity with the exogenous and highly infectious gibbon ape leukemia virus (GALV), the infectivity of KoRV, like that of other ERVs, is substantially lower than that of GALV. Differences in the protein coding regions of KoRV that distinguish it from GALV were introduced into the GALV genome, and their functional consequences were assessed. We identified a KoRV gagpol L domain mutation as well as five residues present in the KoRV envelope (env) that, when substituted for the corresponding residues of GALV, resulted in vectors exhibiting substantially reduced titers similar to those observed with KoRV vectors. In addition, KoRV env protein lacks an intact CETTG motif that we have identified as invariant among highly infectious gammaretroviruses. Disruption of this motif in GALV results in vectors with reduced syncytia forming capabilities. Functional assessment of specific sequences that contribute to KoRV's attenuation from a highly infectious GALV-like progenitor virus has allowed the identification of specific modifications in the KoRV genome that correlate with its endogenization.adaptation ͉ endogenous retrovirus ͉ koala K oala retrovirus (KoRV) infection is widespread among koalas of mainland Australia. In the early 1920s, a founder population of koalas from the southeastern state of Victoria was established on Kangaroo Island. The Kangaroo Island koalas were recently reported free of KoRV. The discovery of a KoRV-free population of koalas, together with the observations that KoRV remains actively transcribed in its host and that KoRV has integrated into germ line tissue, suggests that this retrovirus is a recently introduced endogenous retrovirus (ERV) (1). KoRV's closest genomic relative is the exogenous gibbon ape leukemia virus (GALV). The only recorded GALV outbreak was confined to gibbon apes originating from an animal holding facility in Thailand in the late 1960s through the 1970s (2). In contrast, since the initial observation of leukemias and neoplasias in koalas in the 1960s (3) and the description of a gammaretrovirus as the possible cause (4), KoRV is now recognized as endemic among Australian mainland koalas (1, 5).Although ERVs are for the most part dormant, there is an increasing amount of evidence to suggest that mobile retroelements contribute to genomic evolution (6, 7). KoRV is unusual in that it coexists as both an exogenous and endogenizing viral agent, providing a very rare real-time model for the role, if any, of viral endogenization in speci...