38K (ac98) of Autographa californica multiple nucleopolyhedrovirus (AcMNPV) is a highly conserved baculovirus gene whose function is unknown. To determine the role of 38K in the baculovirus life cycle, a 38K knockout bacmid containing the AcMNPV genome was generated through homologous recombination in Escherichia coli. Furthermore, a 38K repair bacmid was constructed by transposing the 38K open reading frame with its native promoter region into the polyhedrin locus of the 38K knockout bacmid. After transfection of these viruses into Spodoptera frugiperda cells, the 38K knockout bacmid led to a defect in production of infectious budded virus, while the 38K repair bacmid rescued this defect, allowing budded-virus titers to reach wild-type levels. Slot blot analysis indicated that 38K deletion did not affect the levels of viral DNA replication. Subsequent immunoelectron-microscopic analysis revealed that masses of electron-lucent tubular structures containing the capsid protein VP39 were present in cells transfected with 38K knockout bacmids, suggesting that nucleocapsid assembly was interrupted. In contrast, the production of normal nucleocapsids was restored when the 38K knockout bacmid was rescued with a copy of 38K. Recombinant virus that expresses 38K fused to green fluorescent protein as a visual marker was constructed to monitor protein transport and localization within the nucleus during infection. Fluorescence was first detected along the cytoplasmic periphery of the nucleus and subsequently localized to the center of the nucleus. These results demonstrate that 38K plays a role in nucleocapsid assembly and is essential for viral replication in the AcMNPV life cycle.