As part of an investigation into the effects of endogenous retroviruses on adjacent genes, we have isolated a cDNA clone derived from the human teratocarcinoma cell line NTera2D1 representing a chimeric transcript in which an endogenous retrovirus-like element, RTVL-H, has been spliced to downstream cellular sequences. The 5' terminus of this clone, termed AF-5, occurs one bp downstream of the predicted transcriptional start site in the RTVL-H long terminal repeat (LTR). AF-5 contains an open reading frame of 689 amino acids beginning within RTVL-H sequences that has two domains of homology with phospholipase A2 (PLA2). These domains, of approximately 120 amino acids each, are 30-38% identical to secreted PLA2s and contain sequence features of both group I and II enzymes. The corresponding AF-5 transcript is 2.5 kb and is derived from a single copy novel gene termed PLA2L. Southern analysis indicates that the RTVL-H element is normally present in human DNA upstream of the PLA2L gene. RTVL-H/PLA2L chimeric transcripts were detected in two independent teratocarcinoma cell lines but not in several other cell lines or primary human tissues. Characterization of additional cDNA clones and PCR analysis indicates that multiple RTVL-H/PLA2L alternatively spliced transcripts are expressed. No evidence has been found for transcription from a non-LTR promoter. These findings strongly suggest that the endogenous LTR promotes expression of the human PLA2L gene in teratocarcinoma cells.