Previously it was reported that the 16-amino-acid (aa) C-terminal cytoplasmic tail of Moloney murine leukemia virus (MoMLV) transmembrane protein Pr15E is cleaved off during virus synthesis, yielding the mature, fusion active transmembrane protein p15E and the 16-aa peptide (R peptide or p2E). It remains to be elucidated how the R peptide impairs fusion activity of the uncleaved Pr15E. The R peptide from MoMLV was analyzed by Tricine-sodium dodecyl sulfate-polyacrylamide gel electrophoresis and immunostained with antiserum against the synthetic 16-aa R peptide. The R peptide resolved with an apparent molecular mass of 7 kDa and not the 4 kDa seen with the corresponding synthetic peptide. The 7-kDa R peptide was found to be membrane bound in MoMLV-infected NIH 3T3 cells, showing that cleavage of the 7-kDa R-peptide tail must occur before or during budding of progeny virions, in which only small amounts of the 7-kDa R peptide were found. The 7-kDa R peptide was palmitoylated since it could be labeled with [(3)H]palmitic acid, which explains its membrane association, slower migration on gels, and high sensitivity in immunoblotting. The present results are in contrast to previous findings showing equimolar amounts of R peptide and p15E in virions. The discrepancy, however, can be explained by the presence of nonpalmitoylated R peptide in virions, which were poorly detected by immunoblotting. A mechanistic model is proposed. The uncleaved R peptide can, due to its lipid modification, control the conformation of the ectodomain of the transmembrane protein and thereby govern membrane fusion.