Mouse APOBEC3 (mA3) is a cytidine deaminase with antiviral activity. mA3 is linked to the Rfv3 virus resistance factor, a gene responsible for recovery from infection by Friend murine leukemia virus, and mA3 allelic variants differ in their ability to restrict mouse mammary tumor virus. We sequenced mA3 genes from 38 inbred strains and wild mouse species, and compared the mouse sequence and predicted structure with human APOBEC3G (hA3G). An inserted sequence was identified in the virus restrictive C57BL strain allele that disrupts a splice donor site. This insertion represents the long terminal repeat of the xenotropic mouse gammaretrovirus, and was acquired in Eurasian mice that harbor xenotropic retrovirus. This viral regulatory sequence does not alter splicing but is associated with elevated mA3 expression levels in spleens of laboratory and wild-derived mice. Analysis of Mus mA3 coding sequences produced evidence of positive selection and identified 10 codons with very high posterior probabilities of having evolved under positive selection. Six of these codons lie in two clusters in the N-terminal catalytically active cytidine deaminase domain (CDA), and 5 of those 6 codons are polymorphic in Rfv3 virus restrictive and nonrestrictive mice and align with hA3G CDA codons that are critical for deaminase activity. Homology models of mA3 indicate that the two selected codon clusters specify residues that are opposite each other along the predicted CDA active site groove, and that one cluster corresponds to an hAPOBEC substrate recognition loop. Substitutions at these clustered mA3 codons alter antiviral activity. This analysis suggests that mA3 has been under positive selection throughout Mus evolution, and identified an inserted retroviral regulatory sequence associated with enhanced expression in virus resistant mice and specific residues that modulate antiviral activity.