We isolated and characterized a type B thymotropic retrovirus (DMBA-LV) which is highly related to mouse mammary tumor virus (MMTV) isolates and which induces T-cell thymomas with a high incidence and a very short latent period. Regions of nonhomology between the DMBA-LV genome and the MMTV genome were identified by heteroduplex mapping and nucleotide sequence studies. In the electron microscope heteroduplex mapping studies the EcoRI-generated 5' and 3' fragments of the DMBA-LV genome were compared with the corresponding fragments of the MMTV (C3H and GR) genome isolated from mammary tumors. The results indicated that DMBA-LV contained a region of nonhomologous nucleotide sequences in the 3' half of the U3 region of the long terminal repeat (LTR). Nucleotide sequence studies confirmed these results and showed that in this region 440 nucleotides of the MMTV (C3H) sequences were deleted and substituted with a segment of 122 nucleotides. This substituted segment in the form of a tandem repeat structure contained nucleotide sequences derived exclusively from sequences which flanked the substitution loop. The distal glucocorticoid regulatory element was unaltered, and two additional copies of the distal glucocorticoid regulatory element-binding site were present in the substituted region. The restriction endonuclease map of the reconstructed molecular clone of DMBA-LV was identical to that corresponding to unintegrated linear DMBA-LV DNA present in DMBA-LV-induced tumor cell lines. Since the nucleotide sequences of the LTRs present in four different DMBA-LV proviral copies isolated from a single thymoma were identical, we concluded that they were derived from the same parental virus and that this type B retrovirus containing an alteration in the U3 region of its LTR could induce thymic lymphomas. Thus, DMBA-LV represents the first example of a productively replicating type B retrovirus that contains an LTR modified in the U3 region and that has target cell and disease specificity for T cells.