We have previously described a nonconditional mutant of avian sarcoma virus (SE21Q1b) which fails to package viral RNA (Gallis et al., Virology 94:146-161, 1979; Linial et al., Cell 15:1371-1381, 1978). Quail cells transformed by SE21Q1b contain normal amounts of intracellular viral mRNA's for src, env, and gag-pol and release particles with the density of normal virus containing a typical complement of virion proteins, including reverse transcriptase. These virions are noninfectious for both chicken and quail cells and contain primarily cellular rather than viral RNA. Analysis by gel electrophoresis of the cellular DNA of quail cells transformed by SE21Q1b after restriction endonuclease digestion indicated the presence of a single provirus. The provirus was located at one site in the genome of the host cell and was flanked by the characteristic terminally repeated sequences derived from the 3' and 5' ends of viral RNA. The only defect detected in the SE21Q1b provirus was a deletion of ca. 150 base pairs of DNA somewhere between 300 and 600 bases from the left (gag-pol) end of the provirus. Analyses of the proviral DNA of cells transformed by wild-type recombinants between SE21Q1b and leukosis viruses reveal that the recombinants no longer contain this deletion. The deletion, therefore, defines a region on the viral RNA which is required for correct packaging of the virion RNA.