Cellular compartmentalization of RNAs is thought to influence their susceptibility to ribozyme cleavage. As a test of this idea, two retroviral vectors--one encoding a hammer-head ribozyme designed to cleave lacZ transcripts and another encoding the lacZ messenger RNA--were coexpressed inside retroviral packaging cells. Because of the retroviral packaging signal, the ribozyme would be expected to colocalize with the lacZ-containing viral genomic RNA but not with the lacZ messenger RNA. The ribozyme was found to reduce the titer of infectious virus containing lacZ by 90 percent, but had no effect on translation of lacZ messenger RNA. These results indicate that sorting gene inhibitors to appropriate intracellular sites may increase their effectiveness.