Dislocation of endoplasmic reticulum-associated degradation (ERAD) substrates from the endoplasmic reticulum (ER) lumen to cytosol is considered to occur in a single step that is tightly coupled to proteasomal degradation. Here we show that dislocation of luminal ERAD substrates occurs in two distinct consecutive steps. The first is passage across ER membrane to the ER cytosolic face, where substrates can accumulate as ubiquitin conjugates. In vivo, this step occurs despite proteasome inhibition but requires p97/Cdc48p because substrates remain entrapped in ER lumen and are prevented from ubiquitination in cdc48 yeast strain. The second dislocation step is the release of accumulated substrates to the cytosol. In vitro, this release requires active proteasome, consumes ATP, and relies on salt-removable ERbound components, among them the ER-bound p97 and ER-bound proteasome, which specifically interact with the cytosol-facing substrates. An additional role for Cdc48p subsequent to ubiquitination is revealed in the cdc48 strain at permissive temperature, consistent with our finding that p97 recognizes luminal ERAD substrates through multiubiquitin. BiP interacts exclusively with ERAD substrates, suggesting a role for this chaperone in ERAD. We propose a model that assigns the cytosolic face of the ER as a midpoint to which luminal ERAD substrates emerge and p97/Cdc48p and the proteasome are recruited. Although p97/Cdc48p plays a dual role in dislocation and is involved both in passage of the substrate across ER membrane and subsequent to its ubiquitination, the proteasome takes part in the release of the substrate from the ER face to the cytosol en route to degradation.The endoplasmic reticulum-associated degradation (ERAD) 1 is a quality control process that selectively eliminates malfolded proteins or unassembled subunits of oligomeric proteins in the secretory pathway (1, 2). ERAD substrates are dislocated from the endoplasmic reticulum (ER) back to the cytosol via the Sec61 complex (3-6). In the cytosol, ubiquitin is conjugated to the ERAD substrates that are degraded by the proteasome (7). The proteolytically active proteasome has been implicated in the dislocation of ERAD substrates by virtue of their scarcity in cytosol of proteasome-inhibited cells (8 -11). Although stabilization of proteins in the secretory pathway by proteasome inhibitors is generally accepted as an indication for ERAD, ubiquitination of such proteins is a direct evidence for the access of the substrate to the cytosol (7). In most cases, however, accumulation of the multiubiquitinated ERAD substrates to detectable levels requires inhibition of the proteasome. If the proteasome is indeed required for dislocation (8 -11), then ubiquitination of ERAD substrates would not be observed. This applies especially to luminal ERAD substrates, as membrane ERAD substrates inherently display cytosolic domains, which may be ubiquitinated irrespective of dislocation (11-15). Therefore, it is our view that luminal ERAD substrates, whose dislocation is an ...