Retrovirus Moloney murine leukemia virus (M-MuLV) matures by budding at the cell surface. Central to the budding process is the myristoylated viral core protein precursor Gag which, even in the absence of all other viral components, is capable of associating with the cytoplasmic leaflet of the plasma membrane and assembling into extracellular virus-like particles. In this paper we have used heterologous, Semliki Forest virus-driven, expression of M-MuLV Gag to study the mechanism by which this protein is targeted to the cell surface. In pulse-chase experiments, BFA, monensin, and 20 degrees C block did not affect incorporation of Gag into extracellular particles thereby indicating that the secretory pathway is not involved in targeting of Gag to the cell surface. Subcellular fractionation studies demonstrated that newly synthesized Gag became rapidly and efficiently associated with membranes which had a density similar to that of plasma membrane-derived vesicles. Protease-protection studies confirmed that the Gag-containing membranes were of plasma membrane origin, since in crude cell homogenates, the bulk of newly synthesized Gag was protease-resistant as expected of a protein that binds to the cytoplasmic leaflet of the plasma membrane. Taken together these data indicate that targeting of M-MuLV Gag to the cell surface proceeds via direct insertion of the protein to the cytoplasmic side of the plasma membrane. Furthermore, since the membrane insertion reaction is highly efficient and specific, this suggests that the reaction is dependent on as-yet-unidentified cellular factors.