The role of the N-terminal sequence of myeloperoxidase in the intracellular targeting was examined by using glycosylated lysozyme as a reporter. A fusion protein was constructed in which the presequence residues-18 through -6 of the lysozyme moiety had been replaced by residues 1-158 of prepromyeloperoxidase. Expression of the fusion protein in Chinese hamster ovary cells demonstrated its partial secretion and partial intracellular retention. The latter was accompanied by trimming the myeloperoxidase prosequence off the lysozyme moiety. The rate of the retention of the lysozyme fusion protein was higher than that of glycosylated lysozyme that had been expressed in cells transfected with cDNA of glycosylated lysozyme. The retention was insensitive to NH4Cl. In the secreted protein, lysozyme contained predominantly complex oligosaccharides as demonstrated by a proteolytic fragmentation in vitro and resistance to endo-beta-N-acetylglucosaminidase H. In contrast, when targeted to lysosomes, the lysozyme moiety of the fusion protein contained predominantly mannose-rich oligosaccharides. In baby hamster kidney cells, the trimming of the oligosaccharides in the lysozyme fragment was less vigorous, and a selective targeting of molecules bearing mannose-rich oligosaccharides to lysosomes was more apparent than in Chinese hamster ovary cells. In the presence of monensin, the formation of complex oligosaccharides in the fusion protein and its secretion were strongly inhibited, whereas the intracellular fragmentation was not. We suggest that the prosequence of myeloperoxidase participates in the intracellular routing of the precursor and that this routing operates on precursors bearing mannose-rich rather than terminally glycosylated oligosaccharides and diverts them from the secretory pathway at a site proximal to the monensin-sensitive compartment of the Golgi apparatus.