In multidrug-resistant (MDR) derivatives of the mouse lymphoid tumor P388, the emergence of MDR is associated with overexpression and transcriptional activation of the mdr3 gene, either in the absence of (P388/VCR-10) or concomitant with (P388/ADM-2) gene amplification. In both instances, Northern (RNA) blotting analyses have suggested the presence of altered mdr3 transcripts in these cells, possibly originating from novel transcription initiation sites. The mechanisms underlying mdr3 overexpression in these cells have been investigated. In P388/VCR-10 cells, Southern blotting analyses together with genomic DNA cloning and nucleotide sequencing have demonstrated the presence of an intact mouse mammary tumor virus (MMTV) within the boundaries of intron 1 of mdr3. cDNA cloning and nucleotide sequencing indicated that this integration event results in the synthesis and overexpression of a hybrid MMTV-mdr3 mRNA which initiates within the U3 region of the 5' long terminal repeat (LTR) of the provirus. Consequently, this mRNA lacks the normal exon 1 of mdr3 but contains (i) MMTV LTR-derived sequences at its 5' end, (ii) a novel mdr3 exon, mapping within the boundaries of intron 1 downstream of the MMTV integration site and generated by alternative splicing, and (iii) an otherwise intact 3' portion of mdr3 starting at exon 2. A similar type of analysis of P388/ADM-2 cells revealed that mdr3 overexpression in these cells is associated with the integration of an intracisternal A particle (IAP) within an L1Md repetitive element, immediately upstream of mdr3. The IAP insertion results in the overexpression of hybrid IAP-mdr3 mRNA transcripts that initiate within the 3' LTR of the IAP and which contain IAP LTR-derived sequences at the 5' end spliced 14 nucleotides upstream of the normal exon 1 of mdr3. Taken together, these results indicate that independent retroviral insertions were the initial mutagenic event responsible for mdr3 overexpression and survival during drug selection of these cell lines. Amplification of the rearranged and activated mdr3 gene copy occurred during further selection for high-level drug resistance in P388/ADM-2 cells.