To gain insight into the regulation of retroviral infection at the cellular level, we analyzed the distribution of retroviral antigen and nucleic acid in the bursa of Fabricius of the parents and progeny of two highly inbred lines of chickens, one resistant and the other susceptible to infection. Line 15I5 chickens and line 7(2), which are C/C and C/A, respectively, and 15I5 x 7(2) F1 chickens were infected with either RAV-1 or RAV-49 avian leukosis virus (ALV). Most bursal follicles of F1 chickens infected with either virus contained a variable mixture of virus-positive and virus-negative cells and a few (1 to 20%) were void of detectable virus. However, in either parental line the respective virus was uniformly expressed among all follicles. The follicles which excluded virus in the F1 birds were indistinguishable from other infected follicles in the same bursa or in uninfected birds on the basis of histology or cellular antigen expression. It was concluded that virus susceptibility is most likely determined at the bursal stem cell level of differentiation, possibly by a process of allelic exclusion at the retroviral receptor locus.