The oncogene of Rous sarcoma virus (v-src) arose by transduction of a cellular gene (c-src). In an effort to explore the mechanism of transduction, we have identified the splice acceptor site used in the genesis of mRNA for v-src, shown that an equivalent site is used in the splicing of mRNA for c-src, and determined the nucleotide sequence from the boundaries of homology between v-src and c-src. Our data indicate that (i) only a portion of c-src is represented within v-src, (ii) the leftward recombination between the genome of the transducing virus and c-src occurred in an intron of the cellular gene, (iii) v-src is in part a spliced version of the corresponding portion of c-src, and (iv) nucleotide sequences represented once in the genome of the transducing virus become duplicated to flank v-src. These findings indicate that the first step in transduction is probably recombination between DNA forms of the transducing viral genome and c-src and otherwise support the prevailing model for transduction by retroviruses. The carboxyl termini of the proteins encoded by v-src and c-src differ appreciably. An unidentified domain of 127 or 128 nucleotides is located at different positions in the genomes of two strains of RSV and gives evidence of being a foreign element that entered the viral genomes by genetic transposition independent of the transduction of src.