A full-length and C-terminally truncated version of human endogenous retrovirus (HERV)-K10 protease were expressed in Escherichia coli and purified to homogeneity. Both versions of the protease efficiently processed HERV-K10 Gag polyprotein substrate. HERV-K10 Gag was also cleaved by human immunodeficiency virus, type 1 (HIV-1) protease, although at different sites. To identify compounds that could inhibit protein processing dependent on the HERV-K10 protease, a series of cyclic ureas that had previously been shown to inhibit HIV-1 protease was tested. Several symmetric bisamides acted as very potent inhibitors of both the truncated and full-length form of HERV-K10 protease, in subnanomolar or nanomolar range, respectively. One of the cyclic ureas, SD146, can inhibit the processing of in vitro translated HERV-K10 Gag polyprotein substrate by HERV-K10 protease. In addition, in virus-like particles isolated from the teratocarcinoma cell line NCCIT, there is significant accumulation of Gag and Gag-Pol precursors upon treatment with SD146, suggesting the compound efficiently blocks HERV-K Gag processing in cells. This is the first report of an inhibitor able to block cell-associated processing of Gag polypeptides of an endogenous retrovirus.