The genome of Marek's disease virus (MDV) has been predicted to encode a secreted glycoprotein, vLIP, which bears significant homology to the alpha/beta hydrolase fold of pancreatic lipases. Here it is demonstrated that MDV vLIP mRNA is produced via splicing and that vLIP is a late gene, due to its sensitivity to inhibition of DNA replication. While vLIP was found to conserve several residues essential to hydrolase activity, an unfavorable asparagine substitution is present at the lipase catalytic triad acid position. Consistent with structural predictions, purified recombinant vLIP did not show detectable activity on traditional phospholipid or triacylglyceride substrates. Two different vLIP mutant viruses, one bearing a 173-amino-acid deletion in the lipase homologous domain, the other having an alanine point mutant at the serine nucleophile position, caused a significantly lower incidence of Marek's disease in chickens and resulted in enhanced survival relative to two independently produced vLIP revertants or parental virus. These data provide the first evidence that vLIP enhances the replication and pathogenic potential of MDV. Furthermore, while vLIP may not serve as a traditional lipase enzyme, the data indicate that the serine nucleophile position is nonetheless essential in vivo for the viral functions of vLIP. Therefore, it is suggested that this particular example of lipase homology may represent the repurposing of an alpha/beta hydrolase fold toward a nonenzymatic role, possibly in lipid bonding.