We have developed a defective interfering (DI) RNA containing a chloramphenicol acetyltransferase reporter gene, placed behind an intergenic sequence, for studying subgenomic mRNA transcription of mouse hepatitis virus (MHV), a prototype coronavirus. Using this system, we have identified the sequence requirement for MHV subgenomic mRNA transcription. We show that this sequence requirement differs from that for RNA replication. In addition to the previously identified requirement for an intergenic (promoter) sequence, additional sequences from the 5' end of genomic RNA are required for subgenomic mRNA transcription. These upstream sequences include the leader RNA and a spacer sequence between the leader and intergenic sequence, which is derived from the 5' untranslated region and part of gene 1. The spacer sequence requirement is specific, since only the sequence derived from the 5' end of RNA genome, but not from other MHV genomic regions or heterologous sequences, could initiate subgenomic transcription from the intergenic sequence. These results strongly suggest that the wild-type viral subgenomic mRNAs (mRNA2 to mRNA7) and probably their counterpart subgenomic negative-sense RNAs cannot be utilized for mRNA amplification. Furthermore, we have demonstrated that a partial leader sequence present at the 5' end of genome, which lacks the leader-mRNA fusion sequence, could still support subgenomic mRNA transcription. In this case, the leader sequences of the subgenomic transcripts were derived exclusively from the wild-type helper virus, indicating that the MHV leader RNA initiates in trans subgenomic mRNA transcription. Thus, the leader sequence can enhance subgenomic transcription even when it cannot serve as a primer for mRNA synthesis. These results taken together suggest that the 5'-end leader sequence of MHV not only provides a trans-acting primer for mRNA initiation but also serves as a cis-acting element required for the transcription of subgenomic mRNAs. The identification of an upstream cis-acting element for MHV subgenomic mRNA synthesis defines a novel sequence requirement for regulating mRNA synthesis in RNA viruses.