The protamine gene cluster containing the Prm1, Prm2, Prm3, and Tnp2 genes is present in humans, mice, and rats. The Prm1, Prm2, and Tnp2 genes have been extensively studied, but almost nothing is known about the function and regulation of the Prm3 gene. Here we demonstrate that an intronless Prm3 gene encoding a distinctive small acidic protein is present in 13 species from seven orders of mammals. We also demonstrate that the Prm3 gene has not generated retroposons, which supports the contention that genes that are expressed in meiotic and haploid spermatogenic cells do not generate retroposons. The Prm3 mRNA is first detected in early round spermatids, while the PRM3 protein is first detected in late spermatids. Thus, translation of the Prm3 mRNA is developmentally delayed similar to the Prm1, Prm2, and Tnp2 mRNAs. In contrast to PRM1, PRM2, and TNP2, PRM3 is an acidic protein that is localized in the cytoplasm of elongated spermatids and transfected NIH-3T3 cells. To elucidate the function of PRM3, the Prm3 gene was disrupted by homologous recombination. Sperm from Prm3(-/-) males exhibited reductions in motility, but the fertility of Prm3(-/-) and Prm3(+/+) males was similar in matings of one male and one female. We have developed a competition test in which a mutant male has to compete with a rival wild-type male to fertilize a female; the implications of these results are also discussed.