Endogenous retroviruses (ERVs) are proviral sequences that result from colonization of the host germ line by exogenous retroviruses. The majority of ERVs represent defective retroviral copies. However, for most ERVs, endogenization occurred millions of years ago, obscuring the stages by which ERVs become defective and the changes in both virus and host important to the process. The koala retrovirus, KoRV, only recently began invading the germ line of the koala (Phascolarctos cinereus), permitting analysis of retroviral endogenization on a prospective basis. Here, we report that recombination with host genomic elements disrupts retroviruses during the earliest stages of germ-line invasion. One type of recombinant, designated recKoRV1, was formed by recombination of KoRV with an older degraded retroelement. Many genomic copies of recKoRV1 were detected across koalas. The prevalence of recKoRV1 was higher in northern than in southern Australian koalas, as is the case for KoRV, with differences in recKoRV1 prevalence, but not KoRV prevalence, between inland and coastal New South Wales. At least 15 additional different recombination events between KoRV and the older endogenous retroelement generated distinct recKoRVs with different geographic distributions. All of the identified recombinant viruses appear to have arisen independently and have highly disrupted ORFs, which suggests that recombination with existing degraded endogenous retroelements may be a means by which replication-competent ERVs that enter the germ line are degraded.