The human retrovirus XMRV (xenotropic murine leukemia virus-related virus) is associated with prostate cancer, but a causal relationship has not been established. Here, we have used cultured fibroblast and epithelial cell lines to test the hypothesis that XMRV might have direct transforming activity but found only rare transformation events, suggestive of indirect transformation, even when the target cells expressed the human Xpr1 cell entry receptor for XMRV. Characterization of cells from three transformed foci showed that all were infected with and produced XMRV, and one produced a highly active transforming virus, presumably generated by recombination between XMRV and host cell nucleic acids. Given the sequence similarity of XMRV to mink cell focus-forming (MCF) viruses and the enhanced leukemogenic activity of the latter, we tested XMRV for related MCF-like cytopathic activities in cultured mink cells but found none. These results indicate that XMRV has no direct transforming activity but can activate endogenous oncogenes, resulting in cell transformation. As part of these experiments, we show that XMRV can infect and be produced at a high titer from human HT-1080 fibrosarcoma cells that express TRIM5alpha (Ref1), showing that XMRV is resistant to TRIM5alpha restriction. In addition, XMRV poorly infects NIH 3T3 cells expressing human Xpr1 but relatively efficiently infects BALB 3T3 cells expressing human Xpr1, showing that XMRV is a B-tropic virus and that its infectivity is regulated by the Fv1 mouse locus.