Varicella-zoster virus (VZV) glycoprotein E (gE) is essential for VZV replication. To further analyze the functions of gE in VZV replication, a full deletion and point mutations were made in the 62-amino-acid (aa) C-terminal domain. Targeted mutations were introduced in YAGL (aa 582 to 585), which mediates gE endocytosis, AYRV (aa 568 to 571), which targets gE to the trans-Golgi network (TGN), and SSTT, an "acid cluster" comprising a phosphorylation motif (aa 588 to 601). Substitutions Y582G in YAGL, Y569A in AYRV, and S593A, S595A, T596A, and T598A in SSTT were introduced into the viral genome by using VZV cosmids. These experiments demonstrated a hierarchy in the contributions of these C-terminal motifs to VZV replication and virulence. Deletion of the gE C terminus and mutation of YAGL were lethal for VZV replication in vitro. Mutations of AYRV and SSTT were compatible with recovery of VZV, but the AYRV mutation resulted in rapid virus spread in vitro and the SSTT mutation resulted in higher virus titers than were observed for the parental rOka strain. When the rOka-gE-AYRV and rOka-gE-SSTT mutants were evaluated in skin and T-cell xenografts in SCIDhu mice, interference with TGN targeting was associated with substantial attenuation, especially in skin, whereas the SSTT mutation did not alter VZV infectivity in vivo. These results provide the first information about how targeted mutations of this essential VZV glycoprotein affect viral replication in vitro and VZV virulence in dermal and epidermal cells and T cells within intact tissue microenvironments in vivo.