The retroviral oncoprotein v-Rel is a chimeric protein that has 11 helper virus-derived Envelope (Env) amino acids (aa) at its N terminus. Within these N-terminal Env aa of v-Rel there are three aa substitutions compared to the Rev-A helper virus Env. These aa substitutions have previously been shown to impart a number of unique properties onto v-Rel, including increased transforming and transactivating ability. In this study, we have analysed the sequence requirements for the Env aa to influence several properties of v-Rel. Phe residues at aa 3 and 9 are critical for an N-terminal transactivation function of v-Rel, and the analysis of several Env mutants demonstrates that transactivation ability parallels the transforming ability of v-Rel. Substitutions of conservative aa, such as leucine and tyrosine, for Phe 3 and 9 are tolerated for transactivation in chicken embryo fibroblasts and for transformation of chicken spleen cells. In contrast, the substitution of 10 Phe residues at the N terminus of v-Rel does not enable transactivation, indicating that a distinct structure surrounding Phe-3 and Phe-9 is essential for v-Rel function. We also show that the addition of the v-Rel Env aa to the N terminus of human c-Rel can enable it to activate transcription. Taken together, these results indicate that Phe residues at positions 3 and 9 have been selected for their ability to enhance the oncogenicity of v-Rel by increasing its ability to activate transcription.