Xenotropic murine leukemia virus-related virus (XMRV) is a gammaretrovirus that was originally identified from human prostate cancer patients and subsequently linked to chronic fatigue syndrome. Recent studies showed that XMRV is a recombinant mouse retrovirus; hence, its association with human diseases has become questionable. Here, we demonstrated that XMRV envelope (Env)-mediated pseudoviral infection is not blocked by lysosomotropic agents and cellular protease inhibitors, suggesting that XMRV entry is not pH-dependent. The full length XMRV Env was unable to induce syncytia formation and cell-cell fusion, even in cells overexpressing the viral receptor, XPR1. However, truncation of the C-terminal 21 or 33 amino acid residues in the cytoplasmic tail (CT) of XMRV Env induced substantial membrane fusion, not only in the permissive 293 cells but also in the nonpermissive CHO cells that lack a functional XPR1 receptor. The increased fusion activities of these truncations correlated with their enhanced SU shedding into culture media, suggesting conformational changes in the ectodomain of XMRV Env. Noticeably, further truncation of the CT of XMRV Env proximal to the membrane-spanning domain severely impaired the Env fusogenicity, as well as dramatically decreased the Env incorporations into MoMLV oncoretroviral and HIV-1 lentiviral vectors resulting in greatly reduced viral transductions. Collectively, our studies reveal that XMRV entry does not require a low pH or low pH-dependent host proteases, and that the cytoplasmic tail of XMRV Env critically modulates membrane fusion and cell entry. Our data also imply that additional cellular factors besides XPR1 are likely to be involved in XMRV entry.