Analysis of the organization and nucleotide sequence of two human loci related to the transforming gene of Kirsten murine sarcoma virus establishes one as a functional gene and the other as a processed pseudogene. The two final coding exons of the functional gene seem to have arisen by duplication. Differentially spliced mRNAs incorporating one or other of the duplicated exons probably served as the intermediates by which the viral transforming gene and the pseudogene were generated. This suggests that the functional gene may specify either of two related polypeptides depending on the pattern of RNA splicing.