Many mammalian viruses have acquired genes from their hosts during their evolution1. The rationale for these acquisitions is usually quite clear: the captured genes are subverted to provide a selective advantage to the virus. Here we describe the opposite situation, where a viral gene has been sequestered to serve an important function in the physiology of a mammalian host. This gene, encoding a protein that we have called syncytin, is the envelope gene of a recently identified human endogenous defective retrovirus, HERV-W2. We find that the major sites of syncytin expression are placental syncytiotrophoblasts, multinucleated cells that originate from fetal trophoblasts. We show that expression of recombinant syncytin in a wide variety of cell types induces the formation of giant syncytia, and that fusion of a human trophoblastic cell line expressing endogenous syncytin can be inhibited by an anti-syncytin antiserum. Our data indicate that syncytin may mediate placental cytotrophoblast fusion in vivo, and thus may be important in human placental morphogenesis.