The gag-homologous region of the human endogenous retrovirus K10 (HERV-K10) was amplified by PCR from human genomic DNA and was analyzed by DNA cloning, sequencing, and expression of open reading frames in the prokaryotic pATH expression system. The analysis of genomic DNA of three donors provided evidence that HERV-K10 genes contain an open reading frame of 1966 bp spanning the entire gag-homologous region. In the prokaryotic system the entire reading frame of the HERV-K10 gag gene could be expressed as a fusion protein exhibiting a molecular weight of about 110,000. In addition, when the gag-homologous region and the adjacent HERV-K10 protease gene were prokaryotically expressed, we observed a Gag-protease fusion protein that exhibited specific autoproteolytic activities and processing of HERV-K10 Gag protein. By introducing deletions on the right end of the putative protease gene an autocatalytic site could be localized within 300 bp of the putative HERV-K10 protease gene. For the first time, these results provide evidence that the HERV-K10 encodes a full-length Gag protein and a functional protease.