The hepatitis C virus (HCV) genome encodes two envelope glycoproteins (El and E2). These glycoproteins interact to form a noncovalent heterodimeric complex which is retained in the endoplasmic reticulum (ER), To identify whether El and/or E2 contains an ER-targeting signal potentially involved in ER retention of the E1-E2 complex, these proteins were expressed alone and their intracellular localization was studied. Due to misfolding of El in the absence of E2, ho conclusion on the localization of its native form could be drawn from the expression of El alone, E2 expressed in the absence of El was shown to be retained in the ER similarly to E1-E2 complex. Chimeric proteins in which E2 domains were exchanged with corresponding domains of a protein normally transported to the plasma membrane (CD4) were constructed to identify the sequence responsible for its ER retention, The transmembrane domain (TMD) of E2 (C-terminal 29 amino acids) was shown to be sufficient for retention of the ectodomain of CD4 in the ER compartment, Replacement of the E2 TMD by the anchor signal of CD4 or a glycosyl phosphatidylinositol (GPI) moiety led to its expression on the cell surface, In addition, replacement of the E2 TR?ID by the anchor signal of CD4 or a GPI moiety abolished the formation of E1-E2 complexes. Together, these results suggest that, besides having a role as a membrane anchor, the TMD of E2 is involved in both complex formation and intracellular localization.