Endogenous retroviruses (ERVs) are remnants of ancient retroviral infections of the host germline transmitted vertically from generation to generation. It is hypothesized that some ERVs are used by the host as restriction factors to block the infection of pathogenic retroviruses. Indeed, some ERVs efficiently interfere with the replication of related exogenous retroviruses. However, data suggesting that these mechanisms have influenced the coevolution of endogenous and/or exogenous retroviruses and their hosts have been more difficult to obtain. Sheep are an interesting model system to study retrovirus-host coevolution because of the coexistence in this animal species of two exogenous (i.e., horizontally transmitted) oncogenic retroviruses, Jaagsiekte sheep retrovirus and Enzootic nasal tumor virus, with highly related and biologically active endogenous retroviruses (enJSRVs). Here, we isolated and characterized the evolutionary history and molecular virology of 27 enJSRV proviruses. enJSRVs have been integrating in the host genome for the last 5-7 million y. Two enJSRV proviruses (enJS56A1 and enJSRV-20), which entered the host genome within the last 3 million y (before and during speciation within the genus Ovis), acquired in two temporally distinct events a defective Gag polyprotein resulting in a transdominant phenotype able to block late replication steps of related exogenous retroviruses. Both transdominant proviruses became fixed in the host genome before or around sheep domestication (approximately 9,000 y ago). Interestingly, a provirus escaping the transdominant enJSRVs has emerged very recently, most likely within the last 200 y. Thus, we determined sequentially distinct events during evolution that are indicative of an evolutionary antagonism between endogenous and exogenous retroviruses. This study strongly suggests that endogenization and selection of ERVs acting as restriction factors is a mechanism used by the host to fight retroviral infections.