The Autographa californica M nucleopolyhedrovirus (AcMNPV) orf79 (ac79) gene is a conserved gene in baculoviruses and shares homology with genes in ascoviruses, iridoviruses, and several bacteria. Ac79 has a conserved motif and structural similarities to UvrC and intron-encoded endonucleases. Ac79 is produced at early times during infection and concentrates in the nucleus of infected cells at late times, suggesting a cellular compartment-specific function. To investigate its function, an ac79-knockout bacmid was generated through homologous recombination in Escherichia coli. Titration assays showed that budded virus (BV) production was reduced in the ac79-knockout virus compared to control viruses, following either virus infection or the transfection of bacmid DNA. The ac79-knockout virus-infected cells produced plaques smaller than those infected with control ac79-carrying viruses. No obvious differences were observed in viral DNA synthesis, viral protein accumulation, or the formation of occlusion bodies in ac79-knockout and control viral DNA-transfected cells, indicating progression into the late and very late phases of viral infection. However, comparative analyses of the amounts of BV genomic DNA and structural proteins in a given quantity of infectious virions suggested that the ac79-knockout virus produced more noninfectious BV in infected cells than the control virus. The structure of the ac79-knockout BV determined by transmission electron microscopy appeared to be similar to that of the control virus, although aberrant capsid protein-containing tubular structures were observed in the nuclei of ac79-knockout virus-infected cells. Tubular structures were not observed for ac79 viruses with mutations in conserved endonuclease residues. These results indicate that Ac79 is required for efficient BV production.