Random integration of viral vectors can result in undesirable activation of surrounding genes by enhancers in the vectors (vector genotoxicity), or result in variable expression due to effects of surrounding chromatin on the vector transgene (chromatin position effects). Vector genotoxicity has become an area of intense study since the occurrence of gene therapy related leukemias in 5 patients in the French X-SCID trial. Additionally, we find consistent and therefore 2–3 fold higher expression from vectors insulated by the chicken b-globin hypersensitive site (cHS4) insulator; and these vectors achieve therapeutic correction in human b0-thalassemia major, where a very high transgene expression is necessary. However, vectors that insulate the correcting transgene from position effects and genotoxicity significantly compromise viral titers by an order of magnitude. In order to define the mechanism by which this occurs and improve the titers of insulated vector systems, we placed the 1.2Kb cHS4 insulator or different regions of cHS4 that may have insulator activity and/or inert DNA spacers in the 3′LTR of self-inactivating lentiviruses carrying a large b-globin transgene and regulatory elements. We also lengthened the β-globin lentivirus vector by an additional 1.2Kb, by insertion of an internal transgene cassette. We found that addition of 1.2Kb transgene internally to a large “globin” vector did not reduce vector infectious titers. However, when cHS4 sequences or inert DNA spacers of increasing size were placed in the 3′LTR, infectious titers decreased proportional to the length of the insert. This effect occurred regardless of the type of sequence inserted in the 3′ LTR. Vectors carrying the1.2Kb cHS4 or l-DNA spacer in the 3′ LTR had the lowest titers. We next examined the stage of the vector life-cycle affected by large LTR inserts in packaging cells, the quantity and quality of the virus particles generated, and post-entry viral steps in target cells. Equal amounts of full-length viral genomic transcripts were produced in the packaging cells with vectors with or without the 1.2Kb insulator insert. All insertion in the 3′ LTR are placed in the U3 enhancer deleted region, proximal to the viral polyadenylation signal. Also, self-inactivating vectors have a U3 enhancer deletion that also deletes enhancers of polyadenylation. However, despite the insertion of cHS4 elements in this region, no increase in viral readthrough transcription (as measured by northern blot analysis and an enzyme-based assay) occurred with vectors carrying the large 1.2Kb insert. Packaging efficiency was also identical with insulated and uninsulated vectors. Similar degree of viral genome encapsidation occurred, as measured by p24 ELISA, virus associated reverse transcriptase and viral RNA analysis, demonstrating that similar amounts of intact viral particles were produced with insulated and uninsulated vector plasmids. However, lentiviruses carrying the 1.2Kb insert in the 3′LTR were inefficiently processed following target-cell entry, with reduced reverse transcription and integration efficiency. This primarily occurred from increased homologous recombination resulting in increased 1-LTR circles of the insulated vector viral DNA; resulting in reduced vector integration and hence lower transduction/infectious titers. Thus, we found that large inserts in the viral 3′ LTR are packaged efficiently, but have inefficient post-entry viral mRNA processing. In a parallel study, we also did a structure-function analysis of cHS4 fragments and identified key elements necessary for optimal insulation. Vectors constructed with this minimized 650bp cHS4 sequences had a minimal reduction in titers, yet retained full insulator activity. These studies have important implications in the design of gamma-retrovirus or lentivirus vectors with insulator, transgenes or enhancer inserts into the 3′ LTR. [FU and PA contributed equally to this work]