Murine AIDS (MAIDS) is characterized by severe lymphadenopathy and splenomegaly. The proliferation of the infected target B cells is also an important manifestation of the disease (M. Huang, C. Simard, D. G. Kay, and P. Jolicoeur, J. Virol. 65:6562-6571, 1991). The etiologic agent of MAIDS is a defective murine leukemia virus that is deleted of most of its pol and env genes and appears to encode a single protein, the Gag precursor Pr60gag protein. Pr60gag is myristylated and attached to the plasma membrane. To study the role myristylation on the function of Pr60gag, we have generated a myristylation-negative (Myr-) mutant of the MAIDS defective virus. We found that Myr- Pr60gag interacted less tightly with the plasma membrane. In addition, the Myr- MAIDS defective virus mutant was unable to induce expansion of infected cells and was nonpathogenic. These results emphasize the essential role of Pr60gag in the disease process. Our data also suggest that Pr60gag, once recruited to the cell membrane through its myristylation, interacts with other membrane-bound effectors to send signals to induce proliferation of the infected cells and to initiate immune dysfunctions.