Ty3 encodes structural proteins in its upstream open reading frame (GAG3) and catalytic proteins in an overlapping open reading frame (POL3). As is the case for retroviruses, high levels of structural protein versus catalytic proteins are synthesized and we show here that catalytic proteins are derived from a GAG3-POL3 fusion polyprotein. To evaluate the relative contributions of structural and catalytic components of the Ty3 particle, we perturbed the balance of these proteins by fusing the GAG3 and POL3 frames. This fusion Ty3 was capable of complementing low levels of transposition of a donor Ty3 which contained only cis-acting sequences required for transposition. Examination of extracts of cells expressing the GAG3-POL3 fusion mutant showed that particle formation differed qualitatively and quantitatively from viruslike particle formation by wild-type Ty3. Suprisingly, expression of 238 codons of GAG3, encoding only capsid protein, complemented transposition and particle formation defects of the fusion mutant, showing that the limiting deficiency was in capsid, and not in nucleocapsid, function. In addition, protein containing the capsid domain expressed alone accumulated in the same particulate fraction as viruslike particles, showing that it was sufficient for particle formation. The activity of the Ty3 fusion mutant contrasts with the inviability of mutant retroviruses in which gag and pol frames were fused and argues that retrotransposons tolerate considerable variation in the nucleoprotein complexes that permit replication and integration.