We previously described an avian sarcoma-leukosis virus (ASLV) insertion mutation that causes a decrease in the ratio of unspliced to spliced RNA in vivo, resulting in a replication defect. Pseudorevertant viruses containing cis-acting suppressor mutations that restored the normal ratio were isolated. One class of the suppressor mutations consists of single-base changes or small deletions near the 3' splice site, while another consists of deletions in the 3' exon. In this paper we report results from an in vitro analysis of wild-type, mutant, and pseudorevertant pre-mRNA splicing. We find that wild-type RNA is spliced inefficiently in vitro, and that the insertion mutation and suppressors act directly at the level of splicing. Characterization of splicing intermediates reveals that the insertion mutation and suppressor mutations located within the intron alter the pattern of lariat formation. In contrast, suppressor mutations consisting of 3' exon deletions act at an earlier step in the splicing pathway. Thus, the efficiency of splicing at the env 3' splice site can be affected at the level of spliceosome assembly, lariat formation, or cleavage at the 3' splice site and exon ligation.