The effect of interferon on the multiplication of the avian sarcoma virus B77 in duck embryo fibroblasts was studied. The interferon used for this purpose as induced in duck embryo fibroblasts by high multiplicities of reovirus serotype 3 (strain Dearing) and purified to a specific activity of at least 2 x 10(7) units/ml (estimated to be at least 10% pure). Treatment of duck embryo fibroblasts transformed with B77 virus with as little as 50 units/ml of this interferon caused a rapid inhibition of the release of virus particles, and a decrease in the specific infectivity of the virus particles that were released of about six-fold. The protein composition of virus particles released from normal and interferon-treated duck embryo fibroblasts was not detectably different. Examination of the nature of the virus-specified proteins, as determined by precipitation with specific antisera, synthesized at various times after treatment of transformed duck embryo fibroblasts with 300 units/ml of interferon revealed the following major changes: i. a more than 5-fold increase in the amount of a protein with a molecular weight of about 100,000 (P100) precipitated by antiserum to reverse transcriptase. This increase was paralleled by a decrease in the amount of the gag-pol precursors Pr190 and Pr180, but the amount of the alpha and beta subunits of reverse transcriptase was not altered by interferon treatment. ii. An at last 3-fold increase in the amount of cell-associated gag proteins. iii. A two- to ten-fold decrease in the amount of a protein with an apparent molecular weight of 76,000, in all likelihood Pr76, precipitated by antiserum to gp85. The primary cause of the interferon-induced inhibition of virus particle release appears to be inability of Pr76 to associate with gPr95/gp85 in plasma cell membranes.