The gag-pol gene of HTLV-III (human T-lymphotropic virus), the virus linked to AIDS (acquired immune deficiency syndrome), was expressed in yeast, and processing of the gag precursor into proteins of the same size as those in the virion was observed. Processing of the gag gene in yeast cells mimics the process that naturally occurs in mammalian cells during maturation of virions. Therefore it was possible to perform mutational analysis of the virus genome to localize the gene that codes for the protease function to the amino terminal coding region of the pol gene. Since this region overlaps the gag gene, it is likely that ribosomal frameshifting occurs from gag to pol. Antibodies in all of the AIDS patients' sera tested recognized the yeast synthesized gag proteins, although the sera showed differences in relative reactivity to the individual gag proteins and the precursor. This yeast system should be valuable not only for production of viral proteins for diagnostic or vaccine purposes but also for analysis of the genetics and biochemistry of viral gene functions - parameters that are difficult to study otherwise with this virus.