The U3 region of the LTR of oncogenic Moloney murine leukemia virus (Mo-MuLV) and feline leukemia viruses (FeLV) have been previously reported to activate expression of specific cellular genes in trans, such as MHC class I, collagenase IV, and MCP-1, in an integration-independent manner. It has been suggested that transactivation of these specific cellular genes by leukemia virus U3-LTR may contribute to the multistage process of leukemogenesis. The U3-LTR region, necessary for gene transactivational activity, also contains multiple transcription factor-binding sites that are essential for normal virus replication. To dissect the promoter activity and the gene transactivational activity of the U3-LTR, we conducted mutational analysis of the U3-LTR region of FeLV-A molecular clone 61E. We identified minimal nucleotide substitution mutants on the U3 LTR that did not disturb transcription factor-binding sites but abrogated its ability to transactivate the collagenase gene promoter. To determine if these mutations actually have altered any uncharacterized important transcription factor-binding site, we introduced these U3-LTR mutations into the full-length infectious molecular clone 61E. We demonstrate that the mutant virus was replication competent but could not transactivate cellular gene expression. These results thus suggest that the gene transactivational activity is a distinct property of the LTR and possibly not related to its promoter activity. The cellular gene transactivational activity-deficient mutant FeLV generated in this study may also serve as a valuable reagent for testing the biological significance of LTR-mediated cellular gene activation in the tumorigenesis caused by leukemia viruses.