The matrix (M) protein is viewed as the regulator of paramyxovirus particle assembly and budding. Accordingly it was observed to be mutated, and/or decreased in amount, in cases where virus particle production was significantly reduced. Here, a non-productive [nondefective and defective interfering (DI)] Sendai virus infection of COS cells is presented where virus particle production is abolished in the presence of a normal amount of intracellular M protein. In this infection the haemagglutinin-neuraminidase envelope glycoprotein is shown to be dispensable for virion production, and the fusion (F0) envelope glycoprotein behaves as in a productive infection. The M protein is shown to accumulate in perinuclear patches within the cytoplasm. In contrast, localization in the plasma membrane is observed in productive infections. However in both productive and non-productive infections a significant fraction of M protein is found in association with cellular membranes. The M protein-membrane association is shown to take place in the absence of any other viral component, and the M protein-membrane complex exhibits properties similar to those observed for the integral membrane protein F 0. However these properties are distinct from those of the phosphoprotein, which is thought to associate with membranes in a non-specific manner. Concomitant with the cytoplasmic accumulation of M protein and the reduction of virus particle production in this non-productive infection, DI nucleocapsids are shown not to associate with cellular membrane fractions. This is a property which coincides with their poor envelopment in virus particles. Taken together, these data indicate the need for M protein to be recruited at the perinuclear membranes by the nucleocapsids to participate in viral assembly and budding. This view is consistent with a process of viral assembly taking place on internal cytoplasmic membranes rather than at the plasma membrane.