We characterized an insertion mutant of the baculovirus Cydia pomonella granulovirus (CpGV), which contained a transposable element of 3.2 kb. This transposon, termed TCp3.2, has unusually long inverted terminal repeats (ITRs) of 756 bp and encodes a defective gene for a putative transposase. Amino acid sequence comparison of the defective transposase gene revealed a distant relationship to a putative transposon in Caenorhabditis elegans which also shares some similarity of the ITRs. Maximum parsimony analysis of the predicted amino acid sequences of Tc1- and mariner-like transposases available from the GenBank data base grouped TCp3.2 within the superfamily of Tc1-like transposons. DNA hybridization indicated that TCp3.2 originated from the genome of Cydia pomonella, which is the natural host of CpGV, and is present in less than 10 copies in the C. pomonella genome. The transposon TCp3.2 most likely was inserted into the viral genome during infection of host larvae. TCp3.2 and the recently characterized Tc1-like transposon TC14.7 (Jehle et al. 1995), which was also found in a CpGV mutant, represent a new family of transposons found in baculovirus genomes. The occasional horizontal escape of different types of host transposons into baculovirus genomes evokes the question about the possible role of baculoviruses as an interspecies vector in the horizontal transmission of insect transposons.