Abstract. We have recently described a system that recreates in vitro the generation of post-Golgi vesicles from purified Golgi fractions obtained from virusinfected MDCK cells in which the vesicular stomatitis virus-G envelope glycoprotein had been allowed to accumulate in vivo in the TGN. Vesicle formation, monitored by the release of the viral glycoprotein, was shown to require the activation of a GTP-binding ADP ribosylation factor (ARF) protein that promotes the assembly of a vesicle coat in the TGN, and to be regulated by a Golgi-associated protein kinase C (PKC)-like activity. We have now been able to dissect the process of post-Golgi vesicle generation into two sequential stages, one of coat assembly and bud formation, and another of vesicle scission, neither of which requires an ATP supply. The first stage can occur at 20Ā°C, and includes the GTP-dependent activation of the ARF protein, which can be effected by the nonhydrolyzable nucleotide analogue GTP'yS, whereas the second stage is nucleotide independent and can only occur at a higher temperature of incubation. Cytosolic proteins are required for the vesicle scission step and they cannot be replaced by palmitoyl CoA, which is known to promote, by itself, scission of the coatomercoated vesicles that mediate intra-Golgi transport. We have found that PKC inhibitors prevented vesicle generation, even when this was sustained by GTP~/S and ATP levels reduced far below the Km of PKC. The inhibitors suppressed vesicle scission without preventing coat assembly, yet to exert their effect, they had to be added before coat assembly took place. This indicates that a target of the putative PKC is activated during the bud assembly stage of vesicle formation, but only acts during the phase of vesicle release. The behavior of the PKC target during vesicle formation resembles that of phospholipase D (PLD), a Golgi-associated enzyme that has been shown to be activated by PKC, even in the absence of the latter's phosphorylating activity. We therefore propose that during coat assembly, PKC activates a PLD that, during the incubation at 37Ā°C, promotes vesicle scission by remodeling the phospholipid bilayer and severing connections between the vesicles and the donor membrane.XTENSIVE studies on the formation of clathrincoated vesicles at the plasma membrane (for review see Robinson, 1994) and the TGN (Robinson and Kreis, 1992;Traub et al., 1993;Wong and Brodsky, 1992), and of the COPI-and COPII-coated vesicles that affect ER to Golgi and intra-Golgi transport (Barlowe et al., 1994;Bednarek et al., 1995;Ostermann et al., 1993;Salama and Schekman, 1995), have shown that the formation of a transport vesicle is initiated by the assembly of a protein coat on the donor membrane from cytosolic components. The coat is thought to serve as a mechanochemical device that imparts to the membrane the high degree of curvature necessary to form a budding vesicle (Pryer et al., 1992). The formation of a bud is followed by a second, notPlease address all correspondence to David D. Sabatini,...