A novel method is described for the study of viral disassembly and processing in live cells. Vesicular stomatitis virus (VSV) was labelled with the fluorescent probe Bodipy-FL and the resulting conjugate was 97.6% self-quenched due to fluorescence resonance energy transfer between neighbouring Bodipy molecules. In vitro experiments showed a four-fold increase in Bodipy fluorescence after extraction of VSV G protein from the virus envelope with Triton X-100 or beta-octylglucoside. Bodipy-labelled virus retained its capacity to mediate fusion of viral membrane with phosphatidylserine liposomes. Incubation of Bodipy-VSV with proteases in the presence of detergent promoted a total fluorescence enhancement of ca. 20 fold, showing that the conjugate fluorescence was also sensitive to proteolysis. Fluorescence microscopy and flow cytometry experiments with macrophages incubated with Bodipy-VSV revealed that intracellular relaxation of fluorescence self-quenching resulted from a combination of viral disassembly due to pH-induced membrane fusion and viral protein degradation inside the endosomes. When macrophages were incubated simultaneously with ammonium chloride and protease inhibitors, the increase in fluorescence was abolished completely due to inhibition of both endosomal acidification and proteolysis. In addition, experiments carried out in the presence of protease inhibitors alone allowed, for the first time, isolated observation of G protein-mediated fusion of viral envelope with the endosomal membrane in living cells. The results indicate that this methodology may find wide application for further studies of viral infection.