The nascent from of glycosylphosphatidylinositol (GPI)-anchored proteins possesses both amino and carboxy terminal hydrophobic signal sequences to direct processing in the endoplasmic reticulum (ER). Following cleavage of the amino-terminal signal peptide, the carboxy-terminal peptide is processed. Previously, mouse lymphocyte NDA: agrinine ADP-ribosyltransferase (Yac-1) was cloned and the deduced amino acid sequence of the Yac-1 transferase contained hydrophobic amino and carboxy termini, consistent with known signal sequences of GPI-anchored proteins. This tranferase was present on the surface of NMU (rat mammary adenocarcinoma) cells transfected with the wildtype cDNA and was released with phosphatidylinositol-specific phosphilpase C. Expression of the mutant protein, lacking the carboxy terminal hydrophobic sequence, resulted in the peoduction of soluble, secreted from of the transferase. This result shows that carboxy terminal sequence is important for GPI-attachment.