Type C RNA leukemia viruses cause lymphoid neoplasia after an extended latent period by an unknown mechanism. Infection of human or murine cells with murine leukemia viruses rapidly increases the expression of genes belonging to the immunoglobulin superfamily and involved in T-lymphocyte activation, including the class I major histocompatibility complex antigens. We report here that the long terminal repeat (LTR) of Moloney murine leukemia virus encodes a novel trans-activator, which induces transcription and expression of class I major histocompatibility complex genes. The portion of the LTR responsible for trans-activation lies within the U3 region and can be excised from the LTR while maintaining its activity. Analysis of the U3 region of the LTR and its flanking sequences suggests that functional or regulatory elements for the trans-activity exist between nucleotides 32 and 219 of the LTR sequences. The region of the LTR identified here as important in trans-activation has been shown recently to be a critical determinant of leukemogenicity and latency of Moloney murine leukemia virus. These findings suggest a novel mechanism of retrovirus-induced activation of cellular gene expression, potentially contributing to leukemogenesis.