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Reovirus virions are internalized into cells by receptor-mediated endocytosis. Within the endocytic compartment, the viral outer capsid undergoes acid-dependent proteolysis leading to degradation of sigma3 protein and proteolytic cleavage of micro1/micro1C protein. E64 is a specific inhibitor of cysteine-containing proteases that blocks disassembly of reovirus virions. To identify domains in reovirus proteins that influence susceptibility to E64-mediated inhibition of disassembly, we selected variant viruses by serial passage of strain type 3 Dearing (T3D) in murine L929 cells treated with E64. E64-adapted variant viruses (D-EA viruses) produced 7- to 17-fold-greater yields than T3D did after infection of cells treated with 100 microM E64. Viral genes that segregate with growth of D-EA viruses in the presence of E64 were identified by using reassortant viruses isolated from independent crosses of E64-sensitive strain type 1 Lang and two prototype D-EA viruses. Growth of reassortant viruses in the presence of E64 segregated with the S4 gene, which encodes outer-capsid protein sigma3. Sequence analysis of S4 genes of three D-EA viruses isolated from independent passage series revealed a common tyrosine-to-histidine mutation at amino acid 354 in the deduced amino acid sequence of sigma3. Proteolysis of D-EA virions by endocytic protease cathepsin L occurred with faster kinetics than proteolysis of wild-type T3D virions. Treatment of D-EA virions, but not T3D virions, with cathepsin D resulted in proteolysis of sigma3, a property that also was found to segregate with the D-EA S4 gene. These results indicate that a region in sigma3 protein containing amino acid 354 influences susceptibility of sigma3 to proteolysis during reovirus disassembly.