The Ty element of yeast represents a class of eukaryotic transposons that show remarkable structural similarity to retroviral proviruses. Recently, these comparisons have been strengthened by a series of observations on the yeast Ty element: Ty transposes via an RNA intermediate; it contains a sequence (Fig. 1) which, when translated, is homologous to a conserved region found in all reverse transcriptases; a fusion protein encoded by Ty is produced by a frameshift event that is directly analogous to the production of Pr180gag-pol in a retrovirus such as Rous sarcoma virus. Here we identify the reverse transcriptase activity that, until now, has been presumed to mediate Ty transposition and show that it is sequestered in virus-like particles that also contain Ty RNA.