ABSTRACT Jaagsiekte sheep retrovirus (JSRV) is the etiological agent of a contagious lung cancer of sheep known as ovine pulmonary adenocarcinoma (OPA). Expression of the JSRV envelope protein (Env) is sufficient to transform immortalized and primary fibroblasts, but the precise mechanisms of this process are not known. The cellular receptor for JSRV is hyaluronidase 2 (Hyal-2), the product of a putative tumor suppressor gene that in humans maps to a chromosomal region frequently deleted in the development of lung and breast cancers. Here we report studies to determine whether the Hyal-2-JSRV Env interaction plays a role in virus-induced transformation of rodent fibroblasts. Chimeric Env proteins between JSRV and the unrelated murine retroviruses Moloney murine leukemia virus (MMuLV) and mouse mammary tumor virus (MMTV) showed cell surface expression comparable to that of wild-type MMuLV Env and rescued infection of MMuLV particle pseudotypes. Interestingly, an MMuLV-JSRV chimera in which the putative receptor binding domain (RBD) and proline-rich region (PRR) of JSRV Env were replaced by the RBD and PRR of MMuLV induced transformation of 208F, a rodent fibroblast line. Cell lines derived from foci of MMuLV-JSRV chimera-transformed 208F cells grew in soft agar and showed Akt activation, a hallmark of JSRV-transformed rodent fibroblasts. Transformation assays performed using proteins with amino-terminal deletion mutations showed that the carboxy-terminal 141 amino acids of the transmembrane subunit (TM) were sufficient to induce cell transformation when targeted to the membrane with a myristoylation signal. Thus, the JSRV TM is necessary and sufficient to transform rodent fibroblasts. Taken together these results indicate that the interaction with Hyal-2 at least is not an essential determinant of JSRV-induced transformation of fibroblasts and that the viral TM functions essentially as an oncoprotein.