Abstract. Rat microsomal aldehyde dehydrogenase (msALDH) has no amino-terminal signal sequence, but instead it has a characteristic hydrophobic domain at the carboxyl terminus (Miyauehi, K., R. Masaki, S. Taketani, A. Yamamoto, A. Akayama, and Y. Tashiro. 1991. J. Biol. Chem. 266:19536-19542). This membrane-bound enzyme is a useful model protein for studying posttranslational localization to its final destination. When expressed from eDNA in COS-1 cells, wild-type msALDH is localized exclusively in the well-developed ER. The removal of the hydrophobic domain results in the cytosolic localization of truncated proteins, thus suggesting that the portion is responsible for membrane anchoring. The last 35 amino acids of msALDH, including the hydrophobic domain, are sufficient for targeting of E. coli ~5-galactosidase to the ER membrane. Further studies using chloramphenicol acetyltransferase fusion proteins suggest that two hydrophilie sequences on either side of the hydrophobic domain play an important role in ER targeting.great deal of attention has been paid to resolve the mechanism for sorting and targeting of newly synthesized proteins to their final destinations, and this is one of the fundamental problemsin cell biology. Newly synthesized proteins are destined to follow two distinct routes, depending on the presence or absence of a signal sequence at their amino termini (37). The signal recognition particle (SRP) t in the cytosol recognizes and binds to a signal sequence of nascent peptides. The resulting SRP-ribosome-nascent peptides complexes are targeted to the ER membrane through their interactions with the docking protein complex (35,36). After translocation across the ER membrane, secretory and plasma membrane proteins follow a common pathway from the ER, through the Golgi complex, to the cell surface by default with bulk flow of lipids (33). Resident proteins in the central vacuolar system are localized and retained in their final destinations with the aid of either specific targeting (18) or retention signals (25)(26)(27)44).On the other hand, proteins without a signal sequence at their amino termini are synthesized on free polysomes and