We recently reported identification of a previously undescribed gammaretrovirus genome, xenotropic murine leukemia virus-related virus (XMRV), in prostate cancer tissue from patients homozygous for a reduced activity variant of the antiviral enzyme RNase L. Here we constructed a full-length XMRV genome from prostate tissue RNA and showed that the molecular viral clone is replication-competent. XMRV replication in the prostate cancer cell line DU145 was sensitive to inhibition by IFN-β. However, LNCaP prostate cancer cells, which are deficient in JAK1 and RNase L, were resistant to the effects of IFN-β against XMRV. Furthermore, DU145 cells rendered deficient in RNase L with siRNA were partially resistant to IFN inhibition of XMRV. Expression in hamster cells of the xenotropic and polytropic retrovirus receptor 1 allowed these cells to be infected by XMRV. XMRV provirus integration sites were mapped in DNA isolated from human prostate tumor tissue to genes for two transcription factors (NFATc3 and CREB5) and to a gene encoding a suppressor of androgen receptor transactivation (APPBP2/PAT1/ARA67). Our studies demonstrate that XMRV is a virus that has infected humans and is susceptible to inhibition by IFN and its downstream effector, RNase L.