The cytoplasmic domains of viral glycoproteins influence the trafficking and subcellular localization of the glycoproteins and their incorporation into virions. They also promote correct virus morphology and viral budding. The cytoplasmic domains of murine-leukemia-virus envelope-protein TM subunits regulate membrane fusion. During virion maturation the carboxy-terminal 16 amino acid residues of the TM protein are removed by the retroviral protease. Deletion of these residues activates envelope-protein-mediated membrane fusion. Our quantitative analysis of the effects of Moloney murine leukemia virus TM mutations on envelope-protein function support the proposition that a trimeric coiled coil in the TM cytoplasmic domain inhibits fusion. The data demonstrate that cleavage of the TM cytoplasmic domain is not required for viral entry and provide evidence for a model in which fusogenic and nonfusogenic conformations of the envelope protein exists in an equilibrium that is regulated by the cytoplasmic domain. In addition, a conserved tyrosine residue in the TM cytoplasmic domain was shown to play an important role in envelope-protein incorporation into retroviral particles.