Varicella-zoster virus (VZV) glycoprotein E (gE) is the most abundant glycoprotein in infected cells and, in contrast to those of other alphaherpesviruses, is essential for viral replication. The gE ectodomain contains a unique N-terminal region required for viral replication, cell-cell spread, and secondary envelopment; this region also binds to the insulin-degrading enzyme (IDE), a proposed VZV receptor. To identify new functional domains of the gE ectodomain, the effect of mutagenesis of the first cysteine-rich region of the gE ectodomain (amino acids 208 to 236) was assessed using VZV cosmids. Deletion of this region was compatible with VZV replication in vitro, but cell-cell spread of the rOka-DeltaCys mutant was reduced significantly. Deletion of the cysteine-rich region abolished the binding of the mutant gE to gI but not to IDE. Preventing gE binding to gI altered the pattern of gE expression at the plasma membrane of infected cells and the posttranslational maturation of gI and its incorporation into viral particles. In contrast, deletion of the first cysteine-rich region did not affect viral entry into human tonsil T cells in vitro or into melanoma cells infected with cell-free VZV. These experiments demonstrate that gE/gI heterodimer formation is essential for efficient cell-cell spread and incorporation of gI into viral particles but that it is dispensable for infectious varicella-zoster virion formation and entry into target cells. Blocking gE binding to gI resulted in severe impairment of VZV infection of human skin xenografts in SCIDhu mice in vivo, documenting the importance of cell fusion mediated by this complex for VZV virulence in skin.