A retrovirus isolated from experimentally induced sheep lung carcinoma (SPCTV) was propagated in chronically infected Himalayan tahr ovarian cells and in normal sheep lung cells. Follow-up of infection of the cells with SPCTV showed the appearance of syncytium, plaque formation, partial recovery and the establishment of a chronic infection. Virus-associated reverse transcriptase activity in the medium fluctuated but remained at a constantly high level at the stage of chronic infection. Stages of type-C virus morphogenesis were demonstrated by electron microscopy. The viral genome was detected in both the nucleus and cytoplasm by in situ hybridization. Chronically infected cells formed colonies when plated in soft agar. Following subcutaneous inoculation of chronically infected cells (of fibroblast origin) into nude mice, lymphoid tumors developed at the site of inoculation and in vital organs.