FrCasE is a mouse retrovirus that causes a fatal noninflammatory spongiform neurodegenerative disease with pathological features strikingly similar to those induced by transmissible spongiform encephalopathy (TSE) agents. Neurovirulence is determined by the sequence of the viral envelope protein, though the specific role of this protein in disease pathogenesis is not known. In the present study, we compared host gene expression in the brain stems of mice infected with either FrCasE or the avirulent virus F43, differing from FrCasE in the sequence of the envelope gene. Four of the 12 disease-specific transcripts up-regulated during the preclinical period represent responses linked to the accumulation of unfolded proteins in the endoplasmic reticulum (ER). Among these genes was CHOP/GADD153, which is induced in response to conditions that perturb endoplasmic reticulum function. In vitro studies with NIH 3T3 cells revealed up-regulation of CHOP as well as BiP, calreticulin, and Grp58/ERp57 in cells infected with FrCasE but not with F43. Immunoblot analysis of infected NIH 3T3 cells demonstrated the accumulation of uncleaved envelope precursor protein in FrCasE- but not F43-infected cells, consistent with ER retention. These results suggest that retrovirus-induced spongiform neurodegeneration represents a protein-folding disease and thus may provide a useful tool for exploring the causal link between protein misfolding and the cytopathology that it causes.