ABSTRACT The principles underlying membrane binding and assembly of retroviral Gag proteins into a lattice are understood. However, little is known about how these processes are related. Using purified Rous sarcoma virus Gag and Gag truncations, we studied the interrelation of Gag-Gag interaction and Gag-membrane interaction. Both by liposome binding and by surface plasmon resonance on a supported bilayer, Gag bound to membranes much more tightly than did matrix (MA), the isolated membrane binding domain. In principle, this difference could be explained either by protein-protein interactions leading to cooperativity in membrane binding or by the simultaneous interaction of the N-terminal MA and the C-terminal nucleocapsid (NC) of Gag with the bilayer, since both are highly basic. However, we found that NC was not required for strong membrane binding. Instead, the spacer peptide assembly domain (SPA), a putative 24-residue helical sequence comprising the 12-residue SP segment of Gag and overlapping the capsid (CA) C terminus and the NC N terminus, was required. SPA is known to be critical for proper assembly of the immature Gag lattice. A single amino acid mutation in SPA that abrogates assembly in vitro dramatically reduced binding of Gag to liposomes. In vivo , plasma membrane localization was dependent on SPA. Disulfide cross-linking based on ectopic Cys residues showed that the contacts between Gag proteins on the membrane are similar to the known contacts in virus-like particles. Taken together, we interpret these results to mean that Gag membrane interaction is cooperative in that it depends on the ability of Gag to multimerize. IMPORTANCE The retroviral structural protein Gag has three major domains. The N-terminal MA domain interacts directly with the plasma membrane (PM) of cells. The central CA domain, together with immediately adjoining sequences, facilitates the assembly of thousands of Gag molecules into a lattice. The C-terminal NC domain interacts with the genome, resulting in packaging of viral RNA. For assembly in vitro with purified Gag, in the absence of membranes, binding of NC to nucleic acid somehow facilitates further Gag-Gag interactions that lead to formation of the Gag lattice. The contributions of MA-mediated membrane binding to virus particle assembly are not well understood. Here, we report that in the absence of nucleic acid, membranes provide a platform that facilitates Gag-Gag interactions. This study demonstrates that the binding of Gag, but not of MA, to membranes is cooperative and identifies SPA as a major factor that controls this cooperativity.