The lactose permease of Escherichia coli has 12 transmembrane hydrophobic domains in probable and-helical conformation connected by hydrophilic loops. Previous studies [Consler, T. G., Persson, B., et al. (1993) Proc. Natl. Acad. Sci. U.S.A. 90, 6934-6938] demonstrate that a peptide fragment (the XB domain) containing a factor Xa protease site immediately upstream of a biotin acceptor domain can be engineered into the permease, thereby allowing rapid purification to a high state of purit:y. Here we describe the use of the XB domain to probe topology and insertion. Cells expressing permease with the XB domain at the N terminus, at the C terminus, or in loop 6 or 10 on the cytoplasmic face of the membrane catalyze active transport, although only the chimeras with the XB domain at the C terminus or in loop 6 are biotinylated. In contrast, chimeras with the XB domain in periplasmic loop 3 or 7 are inactive, but strikingly, both constructs are biotinylated. Furthermore, the XB domain in all the constructs, particularly in the loop 3 and loop 7 chimeras, is accessible from the cytoplasmic face of the membrane, as evidenced by factor Xa proteolysis or avidin binding studies with spheroplasts and disrupted membrane preparations. Finally, alkaline phosphatase fusions one loop downstream from each periplasmic XB domain exhibit high phosphatase activity. Thus, the presence of the XB domain in a periplasmic loop apparently blocks translocation of a discrete segment of the permease consisting of the loop and the two adjoining helices without altering insertion of the remainder of the protein. The results provide a strong indication that XB domain insertion cannot be used to study the topology of polytopic membrane proteins. On the other hand, the approach yields unique and important information regarding insertion, and it seems likely that certain regions of lactose permease may be inserted as helical hairpins. The findings are discussed in the context of other observations indicating that different regions of the permease may be inserted by different mechanisms.