A unique feature of the Toxoplasma gondii purine salvage pathway is the expression of two isoforms of the hypoxanthine-xanthine-guanine phosophoribosyltransferase (HXGPRT) of the parasite encoded by a single genetic locus. These isoforms differ in the presence or absence of a 49-amino acid insertion (which is specified by a single differentially spliced exon) but exhibit similar substrate specificity, kinetic characteristics, and temporal expression patterns. To examine possible functional differences between the two HXGPRT isoforms, fluorescent protein fusions were expressed in parasites lacking the endogenous hxgprt gene. Immunoblot analysis of fractionated cell extracts and fluorescence microscopy indicated that HXGPRT-I (which lacks the 49-amino acid insertion) is found in the cytosol, whereas HXGPRT-II (which contains the insertion) localizes to the inner membrane complex (IMC) of the parasite. Simultaneous expression of both isoforms resulted in the formation of hetero-oligomers, which distributed between the cytosol and IMC. Chimeric constructs expressing N-terminal peptides from either isoform I (11 amino acids) or isoform II (60 amino acids) fused to a chloramphenicol acetyl transferase (CAT) reporter demonstrated that the N-terminal domain of isoform II is both necessary and sufficient for membrane association. Metabolic labeling experiments with transgenic parasites showed that isoform II or an isoform II-CAT fusion protein (but not isoform I or isoform I-CAT) incorporate [ 3 H]palmitate. Mutation of three adjacent cysteine residues within the isoform II-targeting domain to serines blocked both palmitate incorporation and IMC attachment without affecting enzyme activity, demonstrating that acylation of N-terminal isoform II cysteine residues is responsible for the association of HXGPRT-II with the IMC.