ABSTRACT The Ty3 retrotransposon assembles into 50-nm virus-like particles that occur in large intracellular clusters in the case of wild-type (wt) Ty3. Within these particles, maturation of the Gag3 and Gag3-Pol3 polyproteins by Ty3 protease produces the structural proteins capsid (CA), spacer, and nucleocapsid. Secondary and tertiary structure predictions showed that, like retroviral CA, Ty3 CA contains a large amount of helical structure arranged in amino-terminal and carboxyl-terminal bundles. Twenty-six mutants in which alanines were substituted for native residues were used to study CA subdomain functions. Transposition was measured, and particle morphogenesis and localization were characterized by analysis of protein processing, cDNA production, genomic RNA protection, and sedimentation and by fluorescence and electron microscopy. These measures defined five groups of mutants. Proteins from each group could be sedimented in a large complex. Mutations in the amino-terminal domain reduced the formation of fluorescent Ty3 protein foci. In at least one major homology region mutant, Ty3 protein concentrated in foci but no wt clusters of particles were observed. One mutation in the carboxyl-terminal domain shifted assembly from spherical particles to long filaments. Two mutants formed foci separate from P bodies, the proposed sites of assembly, and formed defective particles. P-body association was therefore found to be not necessary for assembly but correlated with the production of functional particles. One mutation in the amino terminus blocked transposition after cDNA synthesis. Our data suggest that Ty3 proteins are concentrated first, assembly associated with P bodies occurs, and particle morphogenesis concludes with a post-reverse transcription, CA-dependent step. Particle formation was generally resistant to localized substitutions, possibly indicating that multiple domains are involved.