Pmel17 is a pigment cell-specific integral membrane protein that participates in the formation of the intralumenal fibrils upon which melanins are deposited in melanosomes. The Pmel17 cytoplasmic domain is truncated by the mouse silver mutation, which is associated with coat hypopigmentation in certain strain backgrounds. Here, we show that the truncation interferes with at least two steps in Pmel17 intracellular transport, resulting in defects in melanosome biogenesis. Human Pmel17 engineered with the truncation found in the mouse silver mutant (hPmel17si) is inefficiently exported from the endoplasmic reticulum (ER). Localization and metabolic pulse-chase analyses with site-directed mutants and chimeric proteins show that this effect is due to the loss of a conserved C-terminal valine that serves as an ER exit signal. hPmel17si that exits the ER accumulates abnormally at the plasma membrane due to the loss of a di-leucine–based endocytic signal. The combined effects of reduced ER export and endocytosis significantly deplete Pmel17 within endocytic compartments and delay proteolytic maturation required for premelanosome-like fibrillogenesis. The ER export delay and cell surface retention are also observed for endogenous Pmel17si in melanocytes from silver mice, within which Pmel17 accumulation in premelanosomes is dramatically reduced. Mature melanosomes in these cells are larger, rounder, more highly pigmented, and less striated than in control melanocytes. These data reveal a dual sorting defect in a natural mutant of Pmel17 and support a requirement of endocytic trafficking in Pmel17 fibril formation.