Apolipoprotein B (apoB) is an essential component of chylomicrons, very low density lipoproteins, and low density lipoproteins. ApoB is a palmitoylated protein. To investigate the role of palmitoylation in lipoprotein function, a palmitoylation site was mapped to Cys-1085 and removed by mutagenesis. Secreted lipoprotein particles formed by nonpalmitoylated apoB were smaller and denser and failed to assemble a proper hydrophobic core. Indeed, the relative concentrations of nonpolar lipids were three to four times lower in lipoprotein particles containing mutant apoB compared with those containing wild-type apoB, whereas levels of polar lipids isolated from wild-type or mutant apoB lipoprotein particles appeared identical. Palmitoylation localized apoB to large vesicular structures corresponding to a subcompartment of the endoplasmic reticulum, where addition of neutral lipids was postulated to occur. In contrast, nonpalmitoylated apoB was concentrated in a dense perinuclear area corresponding to the Golgi compartment. The involvement of palmitoylation as a structural requirement for proper assembly of the hydrophobic core of the lipoprotein particle and its intracellular sorting represent novel roles for this posttranslational modification.