Abstract The human T-cell leukemia/lymphoma virus Type 1 (HTLV-1) ORF-I encodes, a ninety-nine amino acid hydrophobic membrane protein, p12I that affects receptors in different cellular compartments. We report here that proteolytic cleavage dictates different cellular localization and functions of p12I. The removal of a non-canonical endoplasmic reticulum (ER) retention/retrieval signal within the amino terminus of p12I is necessary for trafficking to the Golgi apparatus and generation of a completely cleaved 8 kDa protein. The 8 kDa protein in turn traffics to the cell surface, is recruited to the immunological synapse following T-cell receptor (TCR) ligation and down-regulates TCR proximal signaling. The uncleaved 12 kDa form of p12I resides in the ER and interacts with the β and γc chains of the interleukin-2 receptor (IL-2R), the heavy chain of the major histocompatibility complex (MHC) class I, as well as calreticulin and calnexin. Genetic analysis of ORF-I from ex vivo samples of HTLV-1-infected patients reveals predominant amino acid substitutions within ORF-I that inhibits proteolytic cleavage, suggesting that ER associated functions of p12I may contribute to the survival and proliferation of the infected T-cells in the host.