We have studied the properties of dicistronic transcriptional units in retroviral vectors. In these vectors, the promoter in the 5' retroviral long terminal repeat (LTR) controls expression of both an upstream cistron (luc) encoding firefly luciferase and a downstream cistron (neo), a selectable marker encoding neomycin phosphotransferase (NPTII). By assaying for simultaneous expression of luc and neo after transfection or infection of hamster BHK, rat 208F, and mouse retroviral packaging cell lines, we have identified important factors that affect expression from the downstream cistron, including the presence of intercistronic ATG sequences, the length of the intercistronic sequence and conformity of the sequence surrounding the downstream start codon to the eukaryotic consensus sequence. Optimized dicistronic vectors produced amounts of NPTII comparable to a vector in which neo was driven by a strong internal promoter consisting of a modified Rous sarcoma virus LTR. Additionally, they produced higher virus titers and demonstrated improved stability of gene expression in the absence of selection. By virtue of their physical compactness and elimination of the need for a separate promoter for every gene, dicistronic transcriptional units allow the introduction of larger genes into retroviral vectors and may allow for more than two genes to be placed in a single vector.