Interferon (IFN) treatment of NIH Swiss mouse embryo cells chronically infected with Rauscher murine leukemia virus (R-MuLV) drastically reduced the release of virus particles from the cells. The characterization of intracellular and extracellular viral specific proteins and polyproteins immunologically with various antisera, and structurally by tryptic digest mapping experiments, indicated that the antiretroviral action of IFN was not due to an IFN-induced alteration in the synthesis of any viral protein. Steady state labeling experiments, however, showed that the processing of three viral specific precursor polyproteins, namely gPr90env, Pr40gag, and Pr25gag, were perceptively slowed in IFN-treated cells. This effect was apparently not related to the ability of these proteins to be modified by phosphorylation or glycosylation after translation since these processes occurred normally in the IFN-treated cells. The treatment of cells with IFN also caused the accumulation of a small amount of a fucosylated viral glycoprotein precursor, termed gP93env, in virus. With the exception of this minor protein, virus released from IFN-treated cells were normal in their content of viral proteins. These virus particles were only slightly less infectious, particle for particle, than virus released from control cultures. Based on these results, we suggest that IFN causes an as yet unelucidated alteration in cell membrane structure of function, or both, which prevents either the insertion of viral core precursor molecules into membrane or the recruitment or clustering of such viral polyproteins into virus assembly centers in the membrane. This suggested mechanism of IFN action is discussed in detail.