Recently, remarkable progress has been made in developing effective combination drug therapies that can control but not cure retroviral replication. Even when effective, these drug regimens are toxic, they require demanding administration schedules, and resistant viruses can emerge. Thus the need for new gene-based therapies continues. In one such approach, capsid-targeted viral inactivation (CTVI), nucleases fused to viral coat proteins are expressed in infected cells and become incorporated during virion assembly. CTVI can eliminate infectious murine retrovirus titer in tissue culture. Here we describe transgenic mice expressing fusions of the Moloney murine leukemia virus (Mo-MuLV) Gag protein to staphylococcal nuclease. This work tests the protective effect and demonstrates in vivo proof-of-principle of CTVI in transgenic mice expressing endogenous proviral copies of Mo-MuLV. The antiviral protein-expressing mice are phenotypically normal, attesting to the lack of toxicity of the fusion protein. The Mo-MuLV infection was much less virulent in transgenic littermates than in nontransgenic littermates. Gag-nuclease expression reduced infectious titers in blood up to 10-fold, decreased splenomegaly and leukemic infiltration, and increased life spans up to 2.5-fold in transgenic relative to nontransgenic infected animals. These results suggest that gene therapies based on similar fusion proteins, designed to attack human immunodeficiency virus or other retroviruses, could provide substantial therapeutic benefits.