We have studied the biosynthesis of avian retrovirus proteins related to reverse transcriptase in permissive avian embryonic cells. Analysis of immune precipitates from avian sarcoma virus (ASV)-infected cells demonstrated the presence of the 180,000-dalton gag-pol "read-through" protein (Pr180gag-pol) and a 130,000-dalton polypeptide (Pr130gag-pol). Pr130gag-pol was found, in serological and peptide mapping studies, to consist primarily of sequences related to reverse transcriptase and the gag-encoded protein p15. Pr180gag-pol was found to be phosphorylated, whereas Pr130gag-pol was not. In addition, only Pr180gag-pol but not Pr130gag-pol was susceptible to cleavage with the virion protease p15. Although the structure of Pr130gag-pol would suggest that it is generated by removal of a portion of the gag region from Pr180gag-pol, an analysis of labeling kinetics has failed to demonstrate unequivocally whether Pr130gag-pol is a cleavage product of Pr180gag-pol or a primary translation product. We were repeatedly unable to detect either Pr180gag-pol or Pr130gag-pol in virus particles released from the cell, whereas both beta and alpha subunits were readily observed. Several presumed intermediates between Pr130gag-pol and the beta subunit of reverse transcriptase were also observed in virions. These studies indicate cleavage of polyemrase precursors at the time of virus budding. On the basis of these data, we present a processing scheme for the generation of reverse transcriptase subunits. We have also examined reverse transcriptase biosynthesis in cells producing two mutants that fail to package the enzyme. Previous work showed that integrated proviruses of both mutants are missing DNA sequences in pol: one mutant, PH9 (Mason et al., J. Virol. 30:132-140, 1979), contains a deletion near the 3' end of pol, whereas the other, SE52d (linial et al., Virology 87:130-141, 1978), may have inserted a host cell sequence near the 5' end of pol. Neither mutant synthesized Pr180gag-pol or Pr130gag-pol, but instead produced novel proteins comprised of sequences shared with gag proteins plus a region antigenically related to reverse transcriptase. Both proteins were defective as precursors to reverse transcriptase. Whereas Pr180gag-pol and Pr130gag-pol were precipitated by an antiserum raised against p32 (a virion protein derived from the portion of the beta subunit removed during processing of beta to alpha [Schiff and Grandgenett, J. Virol. 28:279-291, 1978]), the novel protein synthesized by PH9 ws not precipitated. This suggets that the alpha subunit is generated by a COOH-terminal cleavage of the beta subunit.