N-Linked glycosylation involves the ordered, stepwise synthesis of the unique lipid-linked oligosaccharide precursor Glc(3)Man(9) GlcNAc(2)-PP-Dol on the endoplasmic reticulum (ER), catalyzed by a series of glycosyltransferases. Here we characterize Alg2 as a bifunctional enzyme that is required for both the transfer of the alpha1,3- and the alpha1,6-mannose-linked residue from GDP-mannose to Man(1)GlcNAc(2)-PP-Dol forming the Man(3)GlcNAc(2)-PP-Dol intermediate on the cytosolic side of the ER. Alg2 has a calculated mass of 58 kDa and is predicted to contain four transmembrane-spanning helices, two at the N terminus and two at the C terminus. Contradictory to topology predictions, we prove that only the two N-terminal domains fulfill this criterion, whereas the C-terminal hydrophobic sequences contribute to ER localization in a nontransmembrane manner. Surprisingly, none of the four domains is essential for transferase activity because truncated Alg2 variants can exert their function as long as Alg2 is associated with the ER by either its N- or C-terminal hydrophobic regions. By site-directed mutagenesis we demonstrate that an EX(7)E motif, conserved in a variety of glycosyltransferases, is not important for Alg2 function in vivo and in vitro. Instead, we identify a conserved lysine residue, Lys(230), as being essential for activity, which could be involved in the binding of the phosphate of the glycosyl donor.