CD39 is a member of the membrane-bound ecto-nucleoside triphosphate diphosphohydrolase family. The active site for native CD39 is located on the outer surface of the cellular plasma membrane; however, it is not yet known at what stage this enzyme becomes active along the secretory pathway to the plasma membrane. In this study, sucrose density fractionations performed on CD39-transfected COS-7 cell membranes suggest that CD39 activity resides primarily in the plasma membrane. Furthermore, we have created recombinant, soluble versions of CD39, one that is secreted and others that are retained in the endoplasmic reticulum, to demonstrate that CD39 is not active until it reaches the plasma membrane both in yeast and COS-7 cells. Moreover, the secreted active soluble CD39 in COS-7 cells is found to receive a higher degree of N-glycan addition than the inactive form retained intracellularly. When COS-7 cells were treated with tunicamycin to prevent N-glycosylation, soluble CD39 was not detected in the extracellular medium and remained inactive intracellularly. Surface biotinylation analysis also revealed that surface-expressed wild type CD39 receives a higher degree of N-glycosylation than intracellular forms and that inhibition of N-glycosylation prevents its plasma membrane localization. In addition, both intact and digitonin-permeablized COS-7 cells transfected with CD39 possess similar ecto-ATPase activities, further supporting the conclusion that only surface-expressed CD39 is enzymatically active. All of these data suggest that intracellular CD39 is inactive and that only a fully glycosylated CD39 has apyrase activity and is localized at the cell surface.