Capsid-targeted viral inactivation is an antiviral strategy in which toxic fusion proteins are targeted to virions, where they inhibit viral multiplication by destroying viral components. These fusion proteins consist of a virion structural protein moiety and an enzymatic moiety such as a nuclease. Such fusion proteins can severely inhibit transposition of yeast retrotransposon Ty1, an element whose transposition mechanistically resembles retroviral multiplication. We demonstrate that expression of a murine retrovirus capsid-staphylococcal nuclease fusion protein inhibits multiplication of the corresponding murine leukemia virus by 30- to 100-fold. Staphylococcal nuclease is apparently inactive intracellularly and hence nontoxic to the host cell, but it is active extracellularly because of its requirement for high concentrations of Ca2+ ions. Virions assembled in and shed from cells expressing the fusion protein contain very small amounts of intact viral RNA, as would be predicted for nuclease-mediated inhibition of viral multiplication.