The interactions between differentiation-associated cellular events in the intact mammary gland or in cultured mammary cells and the post-transcriptional activity of the endogenous mouse mammary tumor virus (MMTV) loci were investigated. The transcriptional activities of the endogenous MMTV proviruses of the BALB/c mouse strain (Mtv-6, Mtv-8 and Mtv-9) appear to be regulated differentially during pregnancy-induced mammary gland development (J.E. Knepper, D. Medina and J.S. Butel, J. Virol. 59, 518-521, 1986). Analysis of MMTV-specific proteins at various stages of mammary gland development (virgin, midpregnant, lactating, regressing) established the presence of steady-state levels of a 67,000-Mr env precursor-type polypeptide at all physiological stages. However, processing to lower-molecular-weight env-specific proteins, including a predominant 50,000-Mr species, was detected only with the transition to the functional mammary gland phenotype. The contributions of cell proliferation, cell-matrix interactions, and modulation of functional activity to the pattern of endogenous MMTV protein expression were investigated using a 3-dimensional collagen type I culture system. Growth and cell-matrix interactions (cell polarization, lumen formation) leading to formation of 3-dimensional duct-like structures were permissive for the synthesis and processing of MMTV-specific proteins; accumulation of high levels of the 50,000-Mr env-specific polypeptide was associated with the onset of the fully functional mammary cell phenotype. Expression of MMTV-specific proteins was not due to amplification of a specific cell subpopulation. The potential of the full-length Mtv-8 and Mtv-9 proviruses to be transcribed, as indicated by their methylation status, was not dramatically different between differentiated and undifferentiated mammary cells in culture. This study indicates that MMTV transcriptional activity is reflected at the protein level in mammary tissue of BALB/c mice and that viral protein synthesis and processing may serve as important markers of different physiological stages of mammary epithelial cells. These observations also suggest a general approach to the examination of potential modulatory effects of cellular interactions (cell-cell, cell-matrix or both) known to be important in various differentiated epithelial cell systems for the expression of viral genes.