Mammalian reoviruses undergo acid-dependent proteolytic disassembly within endosomes, resulting in formation of infectious subvirion particles (ISVPs). ISVPs are obligate intermediates in reovirus disassembly that mediate viral penetration into the cytoplasm. The initial biochemical event in the reovirus disassembly pathway is the proteolysis of viral outer-capsid protein sigma 3. Mutant reoviruses selected during persistent infection of murine L929 cells (PI viruses) demonstrate enhanced kinetics of viral disassembly and resistance to inhibitors of endocytic acidification and proteolysis. To identify sequences in sigma 3 that modulate acid-dependent and protease-dependent steps in reovirus disassembly, the sigma 3 proteins of wild-type strain type 3 Dearing; PI viruses L/C, PI 2A1, and PI 3-1; and four novel mutant sigma 3 proteins were expressed in insect cells and used to recoat ISVPs. Treatment of recoated ISVPs (rISVPs) with either of the endocytic proteases cathepsin L or cathepsin D demonstrated that an isolated tyrosine-to-histidine mutation at amino acid 354 (Y354H) enhanced sigma 3 proteolysis during viral disassembly. Yields of rISVPs containing Y354H in sigma3 were substantially greater than those of rISVPs lacking this mutation after growth in cells treated with either acidification inhibitor ammonium chloride or cysteine protease inhibitor E64. Image reconstructions of electron micrographs of virus particles containing wild-type or mutant sigma 3 proteins revealed structural alterations in sigma 3 that correlate with the Y354H mutation. These results indicate that a single mutation in sigma 3 protein alters its susceptibility to proteolysis and provide a structural framework to understand mechanisms of sigma 3 cleavage during reovirus disassembly.