During the course of an investigation into the potential effects of endogenous retroviruses on adjacent gene expression, we isolated two cDNA clones containing a small sequence segment belonging to the human endogenous retrovirus family, HERV-H. Characterization of the clones revealed that they represent transcripts from a novel KRAB zinc finger gene termed ZNF177. The two cDNA clones differ at their 5' termini and in the presence of a 559-bp internal exon. The clone containing this internal exon has six imperfect zinc finger motifs followed by seven perfect copies of the C2H2 type but has a frame shift between the KRAB domain and the downstream zinc finger region. The smaller clone lacks the six imperfect motifs and has an intact ORF. The 5' putative untranslated regions of both cDNAs contain an 86-bp HERV-H env segment and a segment of an Alu repeat, both in the antisense orientation, that have been incorporated by splicing. RT-PCR experiments show evidence of alternative splicing but the majority of transcripts appear to contain the Alu and env segments. Genomic PCR and hybridization experiments suggest that a partial HERV-H element is integrated within the ZNF177 locus, which Southern analysis has shown to be a single-copy gene. Northern and RT-PCR analyses suggest that ZNF177 is transcribed at a low level in a variety of cell types.