The recessive ob2J mutation in mice results in an obese phenotype that is identical to that of the original ob allele. Initial studies indicated that ob2J mice fail to synthesize ob RNA in adipose tissue. Here we report the genomic organization of the mouse obese gene and establish the molecular genetic basis of the ob2J mutation. The ob2J mutation is the result of the insertion of a retroviral-like tranposon in the first intron of the ob gene. The insertion is a member of the ETn family of transposons and contains several splice acceptor and polyadenylation sites. This leads to the production of chimeric RNAs in which the ob first exon is spliced to sequences in the ETn insertion. As a consequence mature ob RNA is not synthesized, and leptin, the encoded protein, is not produced.