Expression of the v-rel oncogene of the reticuloendotheliosis virus, strain T (REV-T), can mediate the transformation of chicken spleen and bone marrow cells. Although the majority of the coding sequence of the v-rel oncogene is derived from the cellular rel sequence, the N- and C-terminal amino acids are coded for by remnants of the REV env gene. The resulting v-rel protein can be described as an env-rel-(out of frame env) fusion protein. Terminal deletion mutants were constructed to determine the role that env sequences play in the transforming activity of v-rel. Deletions were designed to remove only sequences of v-rel derived from former env sequence. Additional deletions removed more substantial amounts of coding sequence. Introduction of deleted genes into an REV-T based retroviral vector permitted the transforming activities to be determined. Deletion analysis indicated that the N-terminal region of pp59v-rel is required for the transforming activity, whereas as many as 100 C-terminal amino acids could be deleted without complete loss of the activity.