HLA-DM is an MHC class II-related heterodimer that is targeted to lysosomal compartments by a tyrosine-based signal YTPL, present in the cytoplasmic tail of the beta chain. Similar signals in other proteins control transport to different intracellular locations and can be recognized at several sorting sites within the cell including the trans-Golgi network, the plasma membrane and the early or sorting endosome. Therefore, in addition to recognizing the basic tyrosine motif, the sorting machinery must be sensitive to additional features associated with these elements. Here we show that efficient trafficking of HLA-DM to lysosomal compartments is dependent upon the proximity of its tyrosine motif to the transmembrane domain. Constructs in which the spacing is altered are rapidly internalized but are expressed at the cell surface. We conclude that the spacing of the HLA-DMB-encoded tyrosine motif relative to the transmembrane domain is an important feature controlling DM sorting in endosomes.