We have produced and characterized, in a baculovirus expression system, simian-human immunodeficiency virus-like particles (SHIV VLPs) containing SIV Gag and HIV envelope (Env) proteins. Recombinant SIV gag (SIVmac239) and full-length or cytoplasmic domain-truncated HIV env from either HIV BH10 or HIV 89.6 virus were coexpressed in insect cells and Env incorporation into released SHIV VLPs was characterized. The expression level of the Env protein was found to be about 20-50% higher in both strains producing the truncated Env. Cell surface expression of the truncated Env proteins was found to be about eightfold higher than that of the full-length Env proteins. Furthermore, the truncated Env proteins exhibited higher levels of cleavage into gp120 and gp41 compared with the full-length Env. The SHIV VLPs produced by the coexpression of SIV gag and truncated HIV env contained both precursor (gp160) and gp120, while predominantly gp160 was found in the VLPs containing full-length Env. Coinfection of a recombinant virus expressing the protease furin also resulted in more efficient cleavage of gp160 to gp120. Both full-length and truncated Env were found to induce CD4+ cell fusion. Analysis of VLPs by immunoelectron microscopy demonstrated the incorporation of both full-length and truncated Env on the surface of VLPs. Truncated Env also was incorporated at higher levels on the surfaces of VLPs than full-length Env. The assembly of VLPs containing biologically active Env proteins may be useful in vaccine development and in functional studies of the HIV envelope protein.