The murine dilute coat color locus encodes an unconventional myosin heavy chain that is thought to be required for the elaboration or maintenance of dendrites or organelle transport in melanocytes and neurons. In previous studies we showed that the d mutation carried by many inbred strains of mice (now referred to as dilute viral, dv), is caused by the integration of an ecotropic murine leukemia virus (Emv‐3) into the dilute gene and that phenotypic revertants of dv (termed d+) result from viral excision; a solo viral long terminal repeat (LTR) is all that remains in revertant DNA. In the studies described here we show that Emv‐3 sequences are located within an intron of the dilute gene in a region of the C‐terminal tail that is differentially spliced. We also show that these Emv‐3 sequences result in the production of shortened and abnormally spliced dilute transcripts and that the level of this effect varies among tissues. This tissue‐specific effect on dilute expression likely accounts for the absence of neurological abnormalities observed in dv mice. Surprisingly, we also found that the solo viral LTR present in revertant d+ DNA produces a tissue‐specific effect on dilute expression, although this effect is less dramatic than with the full‐length provirus and produces no obvious mutant phenotype. These findings have important implications for understanding the effects of viral sequences on mammalian gene expression.