Distal renal tubular acidosis (dRTA) is characterised by defective acid secretion by kidney alpha-intercalated cells. Some dominantly inherited forms of dRTA result from anion exchanger 1 (AE1) mutations. We have developed a stably transfected cell model for the expression of human kidney AE1 (kAE1) and mutant kAE1 proteins in MDCKI cells. Normal kAE1 was delivered to the plasma membrane of non-polarised cells and to the basolateral membrane of polarised cells. The AE1 N-glycan was processed to a complex form. Surprisingly, expression of kAE1 increased the permeability of the paracellular barrier of polarised MDCKI monolayers. All dominant dRTA mutations examined altered the targeting of kAE1 in MDCKI cells. The mutant proteins kAE1(R589H), kAE1(S613F) and kAE1(R901Stop) were retained in the ER in non-polarised cells, but the kAE1(R901Stop) protein was also present in late endosomes/lysosomes. The complex N-glycan of kAE1(R901Stop) was larger than that of normal kAE1. In polarised cells, the mutant kAE1(R901Stop) was mis-targeted to the apical membrane, while the kAE1(R589H) and kAE1(S613F) mutants did not reach the cell surface. These results demonstrate that dominant dRTA mutations cause aberrant targeting of kAE1 in polarised kidney cells and provide an explanation for the origin of dominant dRTA. Our data also demonstrate that the 11 C-terminal residues of kAE1 contain a tyrosine-dependent basolateral targeting signal that is not recognised by mu 1B-containing AP-1 adaptor complexes. In the absence of the N-terminus of kAE1, the C-terminus was not sufficient to localise kAE1 to the basolateral membrane. These results suggest that a determinant within the kAE1 N-terminus co-operates with the C-terminus for kAE1 basolateral localisation.