Ypt6p, the yeast homologue of mammalian Rab6, is involved in the multiple processes regulated by membrane trafficking such as vacuole maturation and membrane protein recycling. Although several lines of evidence suggest that Ypt6p is possibly localized to multiple membrane compartments, the precise localization of endogenous Ypt6p remains to be elucidated. In this study, we developed a novel method for N-terminal tagging of endogenous protein based on homologous recombination and investigated the subcellular localization and function of Ypt6p. Ypt6p and its GTP-bound form were predominantly localized to the cis- to medial-Golgi compartments whereas the GDP-bound form of Ypt6p was localized to the cytosol. Ric1p, a component of the specific GEF complex for Ypt6p, largely colocalized with Ypt6p in the early Golgi, and localization of Ypt6p changed to the cytosol in ric1Δ cells. On the other hand, Gyp6p, a putative GAP for Ypt6p, was localized to the trans-Golgi compartment and deletion of GYP6 increased the localization of Ypt6p at the trans-Golgi, suggesting that Gyp6p promotes the dissociation of Ypt6p from the Golgi when arriving at the trans-Golgi compartment. Additionally, we demonstrated that overexpression of the GDP-bound form of Ypt6p caused defective vacuole formation and recycling of Snc1p to the plasma membrane. These results suggest that the GTP-binding activity of Ypt6p is necessary for intra-Golgi trafficking and protein recycling in the early Golgi compartment.