The Saccharomyces cerevisiae Wbp1 protein is an endoplasmic reticulum (ER), type I transmembrane protein which contains a cytoplasmic dilysine (KKXX) motif. This motif has previously been shown to direct Golgi-to-ER retrieval of type I membrane proteins in mammalian cells (Jackson, M. R., T. Nilsson, and P. A. Peterson. 1993. J. Cell Biol. 121: 317-333). To analyze the role of this motif in yeast, we constructed a SUC2-WBP1 chimera consisting of the coding sequence for the normally secreted glycoprotein invertase fused to the coding sequence of the COOH terminus (including the transmembrane domain and 16-amino acid cytoplasmic tail) of Wbplp. Carbohydrate analysis of the invertase-Wbp1 fusion protein using mannose linkage-specific antiserum demonstrated that the fusion protein was efficiently modified by the early Golgi initial alpha 1,6 mannosyltransferase (Och1p). Subcellular fractionation revealed that > 90% of the alpha 1,6 mannose-modified fusion protein colocalized with the ER (Wbp1p) and not with the Golgi Och1p-containing compartment or other membrane fractions. Amino acid changes within the dily sine motif (KK-->QK, KQ, or QQ) did not change the kinetics of initial alpha 1,6 mannose modification of the fusion protein but did dramatically increase the rate of modification by more distal Golgi (elongating alpha 1,6 and alpha 1,3) mannosyltransferases. These mutant fusion proteins were then delivered directly from a late Golgi compartment to the vacuole, where they were proteolytically cleaved in a PEP4-dependent manner. While amino acids surrounding the dilysine motif played only a minor role in retention ability, mutations that altered the position of the lysines relative to the COOH terminus of the fusion protein also yielded a dramatic defect in ER retention. Collectively, our results indicate that the KKXX motif does not simply retain proteins in the ER but rather directs their rapid retrieval from a novel, Och1p-containing early Golgi compartment. Similar to observations in mammalian cells, it is the presence of two lysine residues at the appropriate COOH-terminal position which represents the most important features of this sorting determinant.