Entry of mammalian reovirus virions into target cells requires proteolytic processing of surface protein sigma3. In the virion, sigma3 mostly covers the membrane-penetration protein mu1, appearing to keep it in an inactive form and to prevent it from interacting with the cellular membrane until the proper time in infection. The molecular mechanism by which sigma3 maintains mu1 in this inactive state and the structural changes that accompany sigma3 processing and mu1 activation, however, are not well understood. In this study we characterized the early steps in sigma3 processing and determined their effects on mu1 function and particle infectivity. We identified two regions of high protease sensitivity, "hypersensitive" regions located at residues 208 to 214 and 238 to 244, within which all proteases tested selectively cleaved sigma3 as an early step in processing. Further processing of sigma3 was required for infection, consistent with the fact that the fragments resulting from these early cleavages remained bound to the particles. Reovirus type 1 Lang (T1L), type 3 Dearing (T3D), and T1L x T3D reassortant virions differed in the sites of early sigma3 cleavage, with T1L sigma3 being cleaved mainly at residues 238 to 244 and T3D sigma3 being cleaved mainly at residues 208 to 214. These virions also differed in the rates at which the early cleavages occurred, with cleavage of T1L sigma3 occurring faster than cleavage of T3D sigma3. Analyses using chimeric and site-directed mutants of recombinant sigma3 identified carboxy-proximal residues 344, 347, and 353 as the primary determinants of these strain differences. The spatial relationships between these more carboxy-proximal residues and the hypersensitive regions were discerned from the sigma3 crystal structure. The results indicate that proteolytic processing of sigma3 during reovirus disassembly is a multistep pathway with a number of molecular determinants.