Several members of the human APOBEC3 family of cytidine deaminases provide an innate intracellular defense against a broad range of retroviruses and retrotransposons. LTR-retrotransposons, such as Saccharomyces cerevisiae Ty1, are structurally, functionally, and evolutionarily related to retroviruses except they lack an extracellular phase. I show that expression of APOBEC3 family members in Saccharomyces cerevisiae strongly inhibits the retrotransposition of Ty1. Human APOBEC3G co-fractionated with sucrose gradient preparations of Ty1 virus-like particles (VLPs) and specifically interacts with Ty1 and HIV-1 Gag proteins in an RNA-dependent manner. Yeast cells that express human APOBEC3G have reduced steady state levels of Ty1 cDNA and reduced integration of Ty1 cDNA. Using a quantitative assay for Ty1 integration and a sensitive method for detecting edited Ty1 cDNA after integration, I showed that as many as 3.6% of the cytosines are edited. In mammalian cells APOBEC3G is associated with mRNA processing bodies (p-bodies). P-bodies are discrete cytoplasmic concentrations of mRNA and mRNA processing proteins where mRNAs are degraded and/or stored. I generated fluorescently tagged hAPOBEC3G and examined its subcellular localization in strains containing fluorescently tagged fusions to TyA1 and components of p-bodies. I found that both hAPOBEC3G and Ty1 Gag localize with protein components of p-bodies. Furthermore hAPOBEC3G and p-bodies co-localize in ste12Δ strains, which do not express Ty1. Gene deletions of known p-body protein components resulted in reduced levels of retrotransposition and a reduced ability of APOBEC3G to inhibit Ty1 retrotransposition. Gene deletions of Xrn1, a 5' to 3' riboexonuclease, and Dhh1, an RNA helicase required for 5' to 3' mRNA decay, caused strong reductions in Ty1 retrotransposition and Ty1 cDNA, while Ty1 mRNA and TyA1 protein levels were marginally decreased. I investigated the translational status of Ty1 mRNA and found that most of the Ty1 mRNA resided in a translationally repressed complex that did not require the translational repressor Dhh1. These results indicate that components of the deadenylation-dependent mRNA decay pathway are facilitators of Ty1 retrotransposition and APOBEC3G interacts with Ty1 at a critical step in retrotransposition.